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Technology, Media &TelecommunicationsPredictions2013

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ContentsForeword3Technology5 The PC is not dead: it’s about usage not units6 Bring your own computer: a tale of two interpretations9 P@$$1234: the end of strong password‑only security11 Enterprise Social Networks: another tool, but not yet a panacea14 Let’s get together: crowdfunding portals bring in the bucks16 The button stays beautiful19Media23 4K kicks off24 Dual video screening readies for prime time27 Connected TV: hits and misses29 Over‑the‑top may lift legacy broadcasters and distributors more than pure plays31 The reality of “cord cutting” in North America33Telecommunications35 A strong year for LTE adoption36 Smartphones ship a billion but usage becomes simpler39 “Mobile” advertising is dead. Long live tablet and smartphone advertising43 All‑you‑can‑app46 The looming spectrum shortage: worse before it gets better49Endnotes52Recent Deloitte thought leadership63Contacts at Deloitte Touche Tohmatsu Limited (DTTL) and its member firms64 Technology, Media & Telecommunications Predictions 2013 1

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“ ur aim with Predictions is to O catalyze discussions around significant developments that may require companies or governments to respond. We provide a view on what we think will happen, what will occur as a consequence, and what the implications are for various types of companies. We do not however presume that ours is the last word on any given topic: our intent is to stoke the debate.”2

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ForewordWelcome to the 12th edition of Deloitte’s Predictions for And we believe key non-changes include manythe technology, media & telecommunications (TMT) sector. hundreds of millions of new smartphone owners continuing to use their data capable devices mostly forThis publication presents Deloitte’s view of key voice and text messages; further we expect the PC todevelopments over the next 12-18 months that are likely remain a dominant device, as measured by usage ratherto have significant medium- to long-term impacts for than just units.companies in TMT and other industries. We hope you and your colleagues find this year’sAs in the previous two years, this year’s Predictions Predictions for the TMT sector useful. As always, wereport is published as a single report rather than split by welcome your feedback. We remind readers that ourtechnology, media and telecommunications. Deloitte’s aim with Predictions is to catalyze discussions aroundview is that developments in each sub-sector are now significant developments that may require companiesso inter-linked and interdependent that TMT executives or governments to respond. We provide a view onneed to be cognizant of key trends across all sectors. what we think will happen, what will likely occur as a consequence, and what the implications are for variousWe are often asked what differentiates Deloitte’s TMT types of companies. We do not however presume thatPredictions from other perspectives. It is all about ours is the last word on any given topic: our intent is tomethodology. stoke the debate.• We have a dedicated global research team. In addition to the text version of Predictions in this report, a discussion around each Prediction is available• We undertake extensive primary research which as a video and podcasts. blends thousands of depth discussions every year with online surveys of tens of thousands of respondents in Whether you are new to this publication, or have been twenty countries. following our Predictions for years, we thank you for your interest. And to the many executives who have• We test our predictions with clients, industry analysts offered their candid input for these reports, we thank and conference attendees in the months leading to you for your time and valuable insights. publication. We look forward to continuing the conversation.• We publish only perspectives that we think are new or counter to existing consensus and which we believe our readers should know about.• We predict change and – where we disagree with the consensus view – lack of change. Jolyon Barker• We aim to provide clear Predictions endpoints, so that Managing Director our accuracy can be evaluated annually. In 2012 as in Global Technology, Media & Telecommunications 2011, we were just over 80 percent accurate. Deloitte Touche Tohmatsu LimitedWe are also asked why we create a Predictions As used in the Predictions, “Deloitte” refers to thedocument. Our answer is simple. Our view is that Deloitte Touche Tohmatsu Limited member firmacross every global industry, knowing what is likely (and TMT practices.unlikely) to come next in TMT trends is a key competitivedifferentiator.For 2013, we expect key changes to include an upsurgein momentum behind Long Term Evolution (LTE)mobile networks, the start of preparations for the nextgeneration of high definition television, known as 4K,the first one billion shipments year for smartphones andincreased challenges for standard passwords. Technology, Media & Telecommunications Predictions 2013 3

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TechnologyThe PC is not dead: it’s about usage not units 6Bring your own computer: a tale of two interpretations 9P@$$1234: the end of strong password‑only security 11Enterprise Social Networks: another tool, but not yet a panacea 14Let’s get together: crowdfunding portals bring in the bucks 16The button stays beautiful 19 Technology, Media & Telecommunications Predictions 2013 5

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The PC is not dead: it’s about usagenot units Deloitte predicts that in 2013, more than 80 percent of Whether reviewing documents, browsing the web Internet traffic measured in bits will continue to come or watching video, the image offered by a PC screen from traditional desktop and laptop personal computers. dwarfs that on a mobile device. A four inch smartphone In addition, more than 70 percent of the hours we screen offers a viewing area of just under seven square spend on computing devices (PCs, smartphones and inches; a seven inch tablet has 21 square inches; tablets) will be on a PC. Time at work accounts for a a 9.7 inch tablet has 40 square inches. By comparison, large portion of that, but even in our non‑work lives we a 14 inch laptop screen has 84 square inches and are likely to use PCs more than 50 percent of the time1. a 25 inch standalone desktop monitor gives our For most people, the PC will continue to be the primary eyes 267 square inches to feast on. The diagonal computing device. We are not in a ‘post‑PC era.’ We are measurements used by display makers are deceptive: in the era of ‘PC Plus.’ for example, a desktop monitor with a diagonal measurement six times larger than a smartphone screen Strong sales of tablets and smartphones have actually has a screen area that is 39 times larger. prompted some to suggest that the PC is becoming an anachronism. From 2010 to 2012, combined Preference for larger screens manifests itself in other sales of tablets and smartphones2 have grown from products, such as televisions. Hundreds of millions over 350 million to around 1 billion units3a. This is far of people bought 40 inch TVs in the past five years greater than the volume of PC sales. PC sales also grew through 2011, the fastest growing category in 2012 over that period, just at a lower rate. PC sales were was 50 inch TVs6. In the United States, the average 350 million in 2010, 353 million in 2011 and are likely person watches over 30 hour per week (of TV) on large to be about 355 million units in 20123b. TV screens, but only minutes per week watching on four inch mobile screens7. The conclusion is that size So while not matching the growth of tablets and matters. Billions of people will – when they have the smartphones, PC sales have remained strong. Also, the option – almost always choose to look at the largest total installed base of PCs should continue to increase screen available. in 2013, albeit at a slower pace than over the past two decades. Further, people sometimes need to create content, not just view it passively. And while it is fairly straightforward There will likely be almost 1.6 billion PCs in use in 2013, to review a spreadsheet on a tablet, using the tablet up from 1.4 billion in 20104. The installed base of tablets to edit even a single cell of a spreadsheet is much will be about a quarter of a billion in 2013, and the more difficult. What’s more, creating a spreadsheet on base of smartphones whose data capability is used on a tablet is almost impossible. Writing a 50‑word email a regular basis will be more than 1.5 billion5 (For more is fine on a smartphone or tablet, but longer writing information about smartphone usage in 2013, see demands a full keyboard. The cutoff appears to be 2013 Prediction: Smartphones ship a billion but usage about 500 words8. becomes simpler). As replacement cycles lengthen, flat or even moderately declining annual sales figures may Certainly, there are hundreds of millions of people not imply a decline in the number of PCs owned. who almost never need to use a spreadsheet or type hundreds or thousands of words. However there are Why has the PC endured and why is it continuing to hundreds of millions who do. And for those consumers, endure? The simple reason is that although PCs, tablets it would be practically impossible to replace their PCs and smartphones all have processors, memory, storage, with a smartphone or tablet. connectivity and user interfaces, each form factor has a unique mix of these attributes that makes it better suited Large screens and keyboards may work in a synergistic to certain tasks. fashion. A recent survey asked smartphone owners which device – smartphone, tablet or PC – they The most important reasons why more than a billion preferred to perform 13 common tasks. Across every people will continue to perform the bulk of their single use case queried, the respondents said they computing on traditional PCs in 2013 are basic physical preferred to use their PC9. attributes: PCs have larger screens, full‑ or mid‑size keyboards and mice or trackpads.6

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For many users, it does not appear to be a question of There is also a significant difference in usage patternsprocessing power. In 2009, the central processing unit between PCs and mobile devices. Smartphone owners(CPU) in a mid‑range PC might have had four cores always have their device with them, and theirrunning at 2.5 GHz, while a mobile processor often had interactions tend to be frequent but brief. One studya single core running at 0.45 GHz. In early 2013, most found that owners checked their phones over 30 timesPC CPUs will still have the same number of cores (now a day, typically for less than 30 seconds at a time13.at 3GHz) but some high‑end mobile devices will have In contrast, PC sessions tend to be longer, especially inCPUs running up to 2.5 GHz with four cores as well10. the workplace, and PC time outside of work is moreNor is it applications; by and large the software that runs than an hour per day14.on PCs also has versions for tablets and smartphones. Despite the seeming ubiquity of smartphones, PCs stillAlthough the difference in processing power has drive the vast majority of connected device traffic.narrowed between PCs and mobile devices, PCs offer In a study published in April 2012, 91.8 percent of allthe unique advantage of expansion capability. connected device traffic in the United States was fromThe average price of a basic PC is under $80011; PCs, with only 5.2 percent from smartphones andhowever, high‑end computer gamers can spend up to 2.5 percent from tablets15. Further, that mix is at the highfive times that amount on machines with more memory, end for mobile device use globally: as seen in Figure 1,ultrafast processors and thousand‑dollar graphics non‑computer traffic across 10 countries ranged from acards. The installed base of these high‑end machines is high of 11.5 percent to a low of 1.5 percent.estimated at more than 50 million in 201212. That’s asmall percentage of the total PC installed base, but no Although the share of connected device traffic fromtablet or smartphone can duplicate the experience. mobile devices is rising, even with very strong mobile and tablet growth their share will be no more than 15 percent worldwide by the end of 2013.Figure 1. Non‑computer traffic for selected markets (December 2011) Singapore 11.5% UK 9.5%United States 8.2% Australia 7.7% Japan 7.1% Canada 6.5% Spain 5.2% India 5.1% France 2.8% Brazil 1.5% 0% 2% 4% 6% 8% 10% 12% Mobile Tablet OtherSource: comScore Device Essentials, December 201116 Technology, Media & Telecommunications Predictions 2013 7

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Bottom line About two billion people, or one third of the global population, are online17, but that third is skewed toward developed markets and more affluent people. Of the 1.5 billion PCs currently in use, many are owned by enterprises and consumers who can afford to buy a PC, a smartphone and a tablet18. That almost certainly will not be true for the next billion people who want to access the Internet. For economic reasons many will pick one, or at most two, devices out of the three primary form factors. It seems likely that in the developing world the PC will be substantially less dominant, and in many cases displaced by the smartphone or tablet. That being said, as Figure 1 shows, the current percentage of non‑computer traffic is not higher in developing markets. Although the data is only for a sample of 10 countries, the two developing markets in the sample show lower non‑computer traffic than all but one developed market. Many people assume that young consumers around the world will gravitate toward cheaper and newer form factors such as tablets, particularly because they tend to have less money than other demographic segments. However, at least one survey shows the exact opposite. When asked which device was most important, 68 percent of all surveyed users chose a laptop and only 32 percent chose a tablet. However, responses varied widely by age: 92 percent of 18‑24 year olds said the PC was their preferred device, compared to only 60 percent of those age 66‑7519. This suggests that the demographics of PC use are likely to be more complex than first thought. Website designers are devoting significant resources to creating mobile versions, which is sensible given the rapid growth in those markets. However, the traditional PC‑based sites ought not to be neglected: most visits will still come from computers with keyboards and large monitors, form factors that require different design rules. Although a search of “tablets replacing enterprise PCs” generates over 24 million hits, the actual number of PCs that have been supplanted by tablets is probably much lower. Back in 2011, Deloitte predicted that tablets would be popular in the enterprise market, and so far companies around the world have purchased about 30 million of them. However, it’s likely that only 10‑15 million of those units are currently being used as PC replacements. In fact, one thing that many of the most publicized examples of enterprise tablet usage have in common is that they replace paper, not PCs – whether it is pilots taking tablets into the cockpit, doctors reviewing medical records in hospitals, restaurants showing wine lists or boards of directors using them as binders. While the enterprise PC installed base is about 500 million20, at most 15 million enterprise tablets are being used as someone’s principal computing device. Also, fewer than 5 million of these are complete PC replacements where employees had PCs taken away and now rely solely on tablets to do 100 percent of their work tasks.8

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Bring your own computer: a taleof two interpretationsDeloitte predicts that in 2013, very few additional The enterprise PC upgrade cycle has lengthened in thecompanies will adopt a bring‑your‑own‑computer last few years25. Budgets have been tight, and many(BYOC) policy, and some of those that already have employees have home PCs that may be more up‑to‑dateone will abandon them. At the same time, Deloitte also than their corporate hardware, and they start asking forpredicts that more than 50 percent of Fortune 500 BYOC policies. According to research, merely offeringcompanies will allow employees to bring their own them freshly upgraded computers could significantlycomputers. The reason for the dual prediction is that reduce the volume of BYOC requests26.there are two common (but different) interpretationsof what BYOC means. Next, there are tax issues. In many countries, a PC funded through stipend or expense reimbursement isThe first arises from the bring‑your‑own‑device (BYOD) a taxable benefit to the employee, and the employertrend, which was one of Deloitte’s 2010 predictions21. will generally not be able to reclaim VAT. If the budgetWithin the enterprise, employees were choosing to allotted for a traditionally procured PC were $1,500, theuse smartphones that were not enterprise‑approved amount available for employees in the higher income taxmodels. Enough people did this or wanted to do it that brackets would be closer to $750. Firms could increasemany companies moved to allow a more diverse range the stipend so that the after tax value was equivalent,of smartphones, across multiple manufacturers and but that would add to the cost of the BYOC program27.operating systems. An additional barrier may be technical support. One ofIn the BYOD model, a worker would buy a smartphone the tradeoffs of offering BYOC is that it may alsothemselves – and in many markets, the price they involve BYO IT as well. When BYOC is only amongpaid was subsidized by a two or three year contract. the early adopters and/or the technologically able,They would then be allowed to connect that device to then technical support can be self‑provisioned, i.e. theaccess corporate emails, and would have the company person asks around, goes on the web, or via an onlinepay for their monthly data and voice plans, which could community of technically savvy users, possibly throughamount to $1,200 or more over two years. an enterprise social network. But that may work less well for mainstream workers, e.g. a sales team. In someBut PCs don’t usually come with data plans or subsidies; companies the recommended solution has been thatinstead the biggest cost is the upfront purchase price people buying their own computer also take out afor hardware and software. So one version of BYOD contract with a third party provider of technical support.for the PC has meant that the company, instead of So as well as buying the computer, they also have toproviding the employee with a standard PC, will give buy a support contract which might cost $200. This maythe employee a set allowance (a voucher, or an expense work in some cases, but may not be as rapid a responsereimbursement) with which they can go out and fund as traditional IT support, is unlikely to provide a ‘loaner’their own laptop22. The employee is then permitted to PC from a pool and allowing remote access to the PCconnect that device to the corporate network and work for the third party help desk may well violate the firm’sin the same way as on a traditionally procured PC. security policies.There are companies that have tried and are trying this On the other hand, there is an entirely different kind ofversion of BYOC. But not many, and it doesn’t seem BYOC that will be much more widely adopted in 2013.to be as successful as hoped. One analysis found that In this version, the enterprise continues to procureonly about five percent of firms have this kind of BYOC PCs for some percentage of its employees in the usualpolicy23. This flavor of BYOC appears higher among manner. But any employee who does not wish to usetechnology companies, where some firms have offered the employer provided PC may use their own personalthis for years, and the benefits touted include lower computer for all work‑related tasks. The employer payscosts, higher productivity and happier employees. no stipend, and offers no support for the machine.One enterprise that has had BYOC since 2008 has seenless than a quarter of employees enroll in the program24. In the United States, over 84 percent of households whose members are employed own a computer28. It isIf this form of procurement worked so well with mobile estimated that in some markets, a third of the workingdevices, why not with PCs? population does at least some contract work29. Some 54 percent of US businesses expect more than half their workers to work remotely by 201730. Technology, Media & Telecommunications Predictions 2013 9

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And another subset of employees may have very strong The services made accessible by the enterprise attachments to specific versions of computer hardware, will almost always include email access, but will operating systems or software. usually be much more than that. It may support the communications services, like conference calls and Almost every firm will have some portion of their webinars. They will also usually support access to the employees falling into one or more of the above enterprise social network, HR functions like, onboarding, categories, and for those workers, a BYOC policy that training videos, online learning, expense submissions, allows them to keep using their personally‑owned payroll and time logging. machine for work purposes is a win‑win situation: they get what they want, and the company doesn’t have to buy, maintain, support or upgrade a device that may cost thousands of dollars per year31. Bottom Line Since the basis of this Prediction is that the stipend-based version of BYOC is unlikely to be widely adopted, the bottom line focuses exclusively on the model under which employees use their own devices for work purposes. Allowing employees to bring their own computers, even when the enterprise pays nothing for the PC or the software on it, is not without costs. Some enterprise software may need to be available in web versions, and re‑engineering those can cost hundreds of thousands or millions of dollars. Users may also need to access certain enterprise functionality through a virtual desktop. There are a number of solutions, and they tend to cost in the hundreds of dollars per employee, although they provide relatively high levels of security: under this structure, at no point does the employee owned device ever connect directly to the corporate IT network. However, Virtual Private Network (VPN) solutions tend to require more bandwidth, and occasionally may work less well for access through cellular or home networks. Security is a crucial aspect of allowing employee-owned PCs to connect to the network. It is necessary to establish policies around what kind of connection is allowed, and over which networks. For example, a secure PC connecting to a secure corporate network, but over an unprotected Wi‑Fi home network isn’t secure any more. Access should be automated so that the appropriate level of security is always enforced, and not left to the employee’s discretion32. One of the most challenging issues around BYOC involves privacy. Employees may be willing, or even pleased to be able to use their own PCs for work. And they may be willing to comply with various security policies. But they are unlikely to be ok with their employer having full access to their PC, including personal files. This creates a challenge if a PC is lost or stolen, or the employee is terminated. Employers have the right and obligation to protect corporate data, but various privacy laws usually prevent them from (as an example) remote wiping all drives on a stolen employee PC. There are various technology solutions that allow for corporate data to be kept in its own ‘sandbox’, but employers should also consult privacy experts to ensure compliance with various laws, which vary by country, or even state or province. Finally, firms must create and enforce policies that make clear to employees using BYOC they have responsibilities and liabilities. These policies should cover maintaining PCs in working order, including current versions of software is kept up to date, especially around security issues like virus protection.10

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P@$$1234: the end of strongpassword‑only securityDeloitte predicts that in 2013 more than 90 percent For years a password that was at least eight charactersof user‑generated passwords, even those considered long and included mixed‑case letters, at least onestrong by IT departments, will be vulnerable to hacking. number, and one non‑alphanumeric symbol wasInadequate password protection may result in billions considered relatively strong. Although not perfectlyof dollars of losses, declining confidence in Internet secure, such a password was considered good enoughtransactions and significant damage to the reputations for even relatively high‑value transactions such asof the companies compromised by attacks. As the value banking and e‑commerce.of the information protected by passwords continues togrow, attracting more hack attempts, high‑value sites How strong were they? An eight‑characterwill likely require additional forms of authentication. password chosen from all 94 characters available on a standard keyboard33 is one of 6.1 quadrillion34 (6,095,689,385,410,816) possible combinations. It would take about a year for a relatively fast 2011 desktop How do passwords get hacked? The problem computer to try every variation. Even gaining access to a is not that a hacker discovers a username, credit card would not be worth the computing time. goes to a login page and attempts to guess the password. That wouldn’t work: most web However, a number of factors, related to human sites freeze an account after a limited number behavior and changes in technology, have combined of unsuccessful attempts, not nearly enough to render the ‘strong’ password vulnerable. to guess even the weakest password. First, humans struggle to remember more than seven Most organizations keep usernames and numbers in our short‑term memory35. Over a longer passwords in a master file. That file is time span, the average person can remember only hashed: a piece of software encrypts both the five. Adding letters, cases, and odd symbols to the username and password together. Nobody in mix makes remembering multiple characters even the organization can see a password in its more challenging. unencrypted form. When there is an attempt to log in, the web site hashes the login attempt in real time and determines if the hashed result matches the one stored in the database for that username. So far, so secure. However, master files are often stolen or leaked. A hashed file is not immediately useful to a hacker, but various kinds of software and hardware, discussed in this Prediction, can decrypt the master file and at least some of the usernames and passwords. Decrypted files are then sold, shared or exploited by hackers. Technology, Media & Telecommunications Predictions 2013 11

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As a result, people use a variety of tricks to make There have also been advances in the hardware used recalling passwords easier. For example, users often to crack passwords. Dictionary and behavior‑based create passwords that reference words and names in our attacks are elegant, but ‘brute‑force’ attack can language and experience. Users typically put the upper also succeed. A brute‑force attack simply applies case symbol at the beginning of the password and place each of the 6.1 quadrillion combinations for an the numbers at the end of the password, repeating the eight‑character password until one works. A dedicated numbers or putting them in ascending order. Although a password‑cracking machine employing readily available keyboard has 32 different symbols, humans generally virtualization software and high‑powered graphics only use half‑a‑dozen of these in passwords because processing units can crack any eight‑character password they have trouble distinguishing between many of in 5.5 hours. The cost of such a machine was about them36. These tricks and tendencies combine to make $30,000 in 2012,40 but hackers don’t even need passwords less random, and therefore weaker. such powerful machines. Crowd‑hacking lets hackers distribute the task over thousands of relatively slow In a recent study of six million actual user‑generated machines, each attacking a different part of the puzzle, passwords, the 10,000 most common passwords to crack a password much faster than any single would have accessed 98.1 percent of all accounts37. machine41. Non‑random distribution allows hackers to create a file, or “dictionary,” of common password words and With so many threats, we might expect users to be phrases, and symbolic variations, making cracking an adopting longer and stronger passwords. That has not account thousands or millions of times easier. occurred, in part because of the difficulty of entering passwords on mobile devices. In general, mobile But non‑random passwords aren’t even the biggest passwords tend to be less secure than those used on a problem. The bigger problem is password re‑use. PC42. On a standard physical keyboard, all 94 possible The average user has 26 password‑protected accounts, characters are easily entered; on a smartphone with a but only five different passwords across those small physical keyboard, accessing all possible characters accounts38. Because of password re‑use, a security takes a bit longer; on a touchscreen‑only device, a user breach on a less‑secure gaming or social networking site may have to page through multiple screens just to find can expose the password that protects a bank account. the “#” symbol. The average user takes 4‑5 seconds to This is exactly what happened in a series of breaches in type a strong ten‑character password on a PC keyboard. 2011 and 2012, and there are now websites where tens That increases to 7‑10 seconds on a smartphone with of millions of actual passwords can be accessed39. a keyboard and 7‑30 seconds on touchscreen devices. A quarter of the people surveyed admitted to using less‑secure passwords on mobile devices to save time43.In a recent study of six million actual user‑generated passwords, the10,000 most common passwords would have accessed 98.1 percentof all accounts.12

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Bottom lineThe incentives for obtaining unauthorized access to accounts will remain strong so all organizations that keep passwords shouldfollow authentication best practices. Usernames and passwords should never be stored in unencrypted form; at a minimumthey should be cryptographically hashed so that hackers are limited to dictionary and brute‑force attacks. A relatively simpleand inexpensive technique called salting appends a random string of characters to the password each time the user enters it,effectively randomizing the hash and making hacking the code orders of magnitude more difficult44. It is also important to establisha password‑creation system that rejects obvious passwords such as “password” and “abc123.” For example, one mobile devicemanufacturer has a blacklist of 106 commonly used passwords that are not allowed45. Finally, a strong password is useless if thepassword reset clue is too easily found (e.g. “mother’s maiden name”). Choosing less searchable reset clues makes the systemmore secure46.Longer passwords could make systems more secure. Adding just one or two characters make brute‑force attacks almost a thousandtimes slower. A ten‑character password has 8,836 more possible combinations than an eight‑character password, and the samepassword‑cracking machine cited above would take more than 5 years to crack it. Truly random passwords would also decreasethe threat from hackers. But given human nature and users who struggle to remember long passwords, refuse to regularly changepasswords, and frequently re‑use passwords across accounts, neither longer nor truly random passwords seem likely to be embraced.In addition, adopting longer or random passwords could increase the frequency of password resets, which tend to make the overallsystem less secure47.Password‑keeper accounts – single sign‑on (SSO) accounts that hold several highly‑secure passwords or provide access to multipleaccounts – can improve adoption of long or random passwords. However, they also create a ‘honey pot’ problem: hackers will have abigger incentive to target the password‑keeper account48.What other solutions might work better?Multi‑factor authentication is a strong candidate. Instead of requiring only an account name and password to gain access, multipleidentification factors would be required. Examples of additional factors include: a password sent to a user’s registered cell phone, adongle that plugs into a USB slot, or a biometric feature such as a fingerprint or iris scan49. Multi‑factor authentication could also beattached to something most users already carry around, such as a cell phone or credit or bank card. This approach combines factorsthat users already possess (knowledge, behavior, passwords, computers, phones and cards in wallets) with behaviors users alreadyunderstand (tapping a credit card with an embedded NFC chip, entering a short passcode).Each type of additional factor has weaknesses, but the idea is that, while a hacker might know your username and password, theyare unlikely to also know your cell phone number or have a copy of your fingerprint. While it is possible to obtain someone’s cellphone or fingerprint, it makes cracking accounts far more difficult50.A number of technology and telecommunication companies will likely implement some form of multifactor authentication with theirservices, software and/or devices in 201351. There is likely to be a direct relationship between the value of the information beingprotected and the complexity of the authentication process: bank accounts would be more demanding than social media networks,which in turn would be more rigorous than a computer game.Password vaults are likely to become more popular for managing multiple accounts and minimizing password re‑use, but they willrequire strong multi‑factor authentication.Finally, organizations must establish better password security policies. Current rules regarding password expiration, minimum length,use of the full symbol set, and password resets are vulnerable and need to be strengthened. In addition, every organization shouldcontinually monitor its systems for hacking attempts, and be ready to respond. Technology, Media & Telecommunications Predictions 2013 13

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Enterprise Social Networks: anothertool, but not yet a panacea Deloitte predicts that by the end of 2013 more than It might be expected that ESNs, being relatively new 90 percent of Fortune 500 companies will have partially technologies, would primarily appeal to younger or fully implemented an Enterprise Social Network employees. In fact, the same survey said that 40‑49 year (ESN), a 70 percent increase over 2011. ESNs are olds were more than 40 percent more likely to have internal platforms designed to foster collaboration, registered and more than 100 percent more likely to communication and knowledge‑sharing among post more than four times per month than 20‑29 year employees. Because they are social, they are intended to olds. This may not surprise those inside the enterprise be engaging, encouraging adoption and participation. who implement ESN solutions, but might surprise many However, many ESNs struggle to attract users. outsiders who have a preconception about which age According to a recent survey, if registration is required, groups are most active on social networks. some 20‑30 percent of employees will not sign up. Of those who register, only a third will read content There were significant variations in rates of registration, once a week or more and just 40 percent will make an consumption of content and creation of content by ESN post in the average month52. geography. For example, the number of users who posted less than once a month ranged from a low of While those numbers might appear low considering 41 percent to a high of 72 percent58. Regardless of some of the more optimistic projections for whether ESNs are better or worse at engaging ESNs, they reflect the challenges companies have employees than previous technologies, almost all always faced popularizing internal networking organizations are likely to desire higher engagement technologies. Enterprise tools for sharing internal levels than they see today. Although the ultimate information (Intranets) have been available since the measure of ESN success ought to be the value they mid‑1990s53 (albeit without the social aspect), but even create, many executives will likely focus on what when every employee’s homepage is the Intranet, prevents employees from using networks and what can more than half don’t use it on a daily basis54. In short, be done to encourage them to do so. employee engagement may be a perennial issue for internal knowledge‑sharing platforms. According to the same survey, a large proportion of employees feel that time restrictions prevent them from How do the numbers from the survey correspond to using ESNs regularly, or at all. Many don’t have a clear consumer‑oriented social networks? Some consumer- idea of the potential uses and benefits, or may believe oriented social networks have large numbers of they are already overloaded with information and members signed up, but in general the proportion of can’t be bothered to keep up with yet another social active users is very much in line with this year’s ESN network59. survey. About 58 percent read posts once a week or less and 56 percent make less than one post a week55. A separate study suggests five percent of users create 75 percent of content56. There may be a natural ceiling on social network usage, with any network eventually comprising a small group of super‑users who contribute most content, a larger group that reads but doesn’t create and a final group that doesn’t create or consume57.14

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What can companies do to improve the success rate Organizations that expect enterprise‑wide ESN adoptionof ESNs? The survey indicates that users feel their in the very near term are likely to be disappointed;ESN experience could be improved if the company whereas those that regard ESNs as simply anotherincorporated the ESN into existing business processes. form of communication that is better than instantIn addition, a ‘how to’ guide and a list of potential uses messaging (IM) and email for certain groups at certainand success stories would be valuable60. About a third of times are more likely to be satisfied. Further, the lowthose who use an ESN say it has made a positive impact marginal cost of most ESNs (many are free for theon their work. That number may generate a positive base version, bundled with other software, or noreturn, based on the investment in the tool; however, more than $5 per employee per year) means that evenmany organizations will likely wish to see a higher level small improvements in employee communication andof engagement. knowledge sharing will likely produce a positive return on investment.A more positive way of appraising ESNs might be asa relatively low‑cost, risk‑managed, complementarymethod of communication and collaboration (internaland perhaps external) that may not be appropriate Bottom linefor every user and every communication, but which Benchmarking previous tools is a useful first step. Executives should assessmay be productive for some people in some contexts. what levels of engagement were achieved by previous tools, and how an ESNEmployees are being offered more and more tools, might be better. They can then decide what the goals for an ESN should be:each of which is increasingly specialized. As the number Registration? Reading posts? Making posts? While it may be possible overof available tools rises, the number of tools not used time to achieve 100 percent registration, that level of regular consumption oralso rises: an inescapable consequence of proliferating contribution seems unlikely. What’s more, it may not be necessary.choices. On the other hand, the current generationof ESN tools is only a few years old. When email and Age‑related assumptions should be challenged. Based on the survey, ESNcell phones were first introduced into the enterprise, administrators cannot assume that enrolling younger employees will be easy,they likely saw adoption rates similar to where ESNs or that older workers will be resistant.are today. Variations by country suggest there are local best practices for encouraging productive use of ESNs. Firms may wish to look to their best performing regions and then apply what they learn to drive engagement across the global enterprise. As with any change in the workplace, communication and training are key. Employees will likely need to be encouraged and taught how to make the best use of the ESN. Showing ‘how and why’ appears to be critical. Even more important is the need to clearly demonstrate the benefits of using the network; for example, showing that responses to information requests are faster and better quality via ESN than email. Most critically, ESN needs to be part of their existing work flow and business processes. Making the ESN a part of everyday communicating, collaborating and creating seems likely to be the tipping point in building engagement and utility. Technology, Media & Telecommunications Predictions 2013 15

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Let’s get together: crowdfunding portalsbring in the bucks Deloitte predicts that crowdfunding portals will raise Crowdfunding’s growth matters to TMT for two $3 billion in 2013, double the $1.5 billion raised in reasons. First, some crowdfunded projects raise funds 2011. for new technological devices and media content such as computer games. Second, the portals themselves are Crowdfunding portals are websites that enable large likely to become a new type of Internet portal. numbers of individuals to support financially a project or company, with each backer contributing just a small Media coverage of crowdfunding tends to focus on its percentage (generally less than one percent) of the total role as an alternative to traditional venture capital (VC); funding. A typical crowdfunded project has thousands however, there is much more to the concept. In fact, of backers. there are four distinct categories of crowdfunding that vary by type of portal and capital raised. Categories of crowdfunding portals Consumer lending is the largest category. Financial institutions and payday lending companies have for many years lent small amounts of money at relatively high interest rates to consumers with bad credit histories. Now, these services are available online through crowdfunding. Between 2008 and 2012, crowdfunding portals likely lent more than $1.5 billion. In 2013 these loans could exceed $1.4 billion, up more than 50 percent from 201261. Reward‑based is the second largest category of portal. Individuals go to a website and support a specific project in exchange for a reward. For example, those assisting with the development of a computer game may get a copy upon completion. Those investing more may receive a basket of games and a T‑shirt. Backers of a new kind of remote‑controlled light bulb might receive a quantity of light bulbs, depending on the level of investment made. Backers of a new play might get tickets to the opening; more generous patrons might be invited to a champagne reception. This category could raise more than $700 million in 201362a. The next biggest category is the donation market. This overlaps with the reward market: many artistic endeavors that use reward crowdfunding also encourage funders to contribute very small amounts of money, typically less than $25, without expectation of a return – except for the knowledge of having contributed to a worthy cause. Donors often receive a thank you in a program or liner notes. Traditional charities usually request donations to support their overall mission, and then decide for themselves how to allocate the funds. Crowdfunding portals can raise funds for individual projects, meaning donors can give to the project of their choice. This market may be worth more than $500 million in 2013. Venture capital, which gets the most media attention, is actually the smallest category. Traditionally, early stage startup companies are initially funded from credit cards and savings, and then reach out to friends and family. This usually covers the first $250,000. Beyond that point startups look for money from individuals (angels) or established venture capitalists, with the first seed round raising perhaps $500,000. Expected changes in North American securities regulation could make it possible for companies to raise money via a crowdfunding portal62b, with contributors receiving an equity stake in the company. This category is the wild card for 2013. It could raise more than a billion dollars if the rules change, but less than $100 million if they don’t.16

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Crowdfunding generally involves small contributions at Equity‑based crowdfunding is often discussed as anthe individual level. Although the top pledge packages alternative to VC for small to mid‑size firms. Growth iscan be more than $10,000, on average the individual accelerating as new platforms are launched, investorcontribution is likely less than a thousand dollars in interest rises and regulatory constraints are reduced.almost every category63. The funds raised for a particular In the United Kingdom, there are several platformsproject or investment tend to be in the thousands or that provide equity‑based financing for startups andtens of thousands of dollars, although on rare occasions growth capital73. In the US, a large crowdfundingthey can be in the millions. For example, on one of the portal raised $15 million in venture capital to pursuebetter known crowdfunded reward sites only 17 projects expansion into equity crowdfunding74. In Canada,raised more than a million dollars and only two raised an alternative stock exchange has publicly stated itsmore than $5 million64. support for crowdfunding75 and a provincial government is contemplating an exemption to the accreditedStill, across tens of thousands of projects and investor rule for crowdfunding sites76, although theinvestments, the total funding can really add up. In the provincial regulator has publicly cautioned that “wouldpast five years, the 30 largest lending portals raised represent a significant change to the current exemptmore than $1.5 billion65. The largest reward platforms market regulatory regime… [and] we may decide notcollected nearly half a billion dollars cumulatively. to introduce a crowdfunding exemption in this or anyDonation sites raised hundreds of millions of dollars. other form“77.Venture capital portals raised just tens of millions ofdollars, but that number is expected to rise dramatically Even if VC portals become larger due to beneficialin the near future66. In aggregate, crowdfunding portals regulatory changes, they may still only capture aare already a multi‑billion dollar industry, growing at small share of the VC market. Startup companiesmore than 50 percent a year. value the intangible contributions such as knowledge and networks that an experienced VC provides.That being said, the $3 billion that crowdfunding is Also, regulations protecting casual (non‑accredited)expected to raise in 2013 remains small compared to investors may remain in place for many jurisdictions.comparable funding mechanisms. Traditional venture Finally, investor enthusiasm may be dampened oncecapital raises about $40 billion annually67; charitable crowd investors experience their first ‘burn’.giving was almost $300 billion in the United States alonein 201168, and the pay day loan market in the United Crowdfunding will more likely have a role inStates was worth more than $50 billion in 200869. complementing traditional VC, generatingIn each category, crowdfunding is growing much faster additional capital at the ‘friends and family’ stagethan traditional sources of funding, but still represents of funding that generally precedes VC involvement.less than one percent of the total. Indeed, crowdfunding could benefit the ‘A round’ market (where startup companies usually first try toGiven crowdfunding’s impressive growth rate, it is worth access institutional money; typically for one to threelooking at some illustrative examples. The reward‑based million dollars) by helping more start‑ups establish proofmarket is expected to have the greatest impact on of concepts and secure their first paying customers.technology and media developers. In May 2012 a Further it could enable VCs to skip the riskier and morecompany sought $100,000 via a popular reward‑based laborious early stage investing that many would ratherportal to make 1,000 programmable watches, but avoid. In a recent survey, seed financing from VCs wasended up collecting $10.3 million from 68,929 people down almost 50 percent year‑over‑year78, indicating– an average of $150 per investor70. Most reward‑based that there may be a funding gap for crowdfunding toprojects have tended to be for consumer products fill. Crowdfunding also brings the potential for moresuch as watches, smartphone accessories or games. democratic or broader access to capital for startups andIn one recent survey, seven of the top ten products fell innovators without personal connections to capital.into these categories71. But there are many exceptions.Some non‑consumer technologies, such as multiple‑corechip architectures, also use the platform72. Technology, Media & Telecommunications Predictions 2013 17

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The Jumpstart Our Business Startups (JOBS) Act in the United States has added to the excitement surrounding Bottom line equity‑based crowdfunding by requiring that the US If regulations around equity crowdfunding are Securities and Exchange Commission (SEC) consider relaxed, there are likely to be increased risks – the creation of new classes of investors who could and not just for investors. While crowdfunding participate in venture‑like financing, in addition to may open the floodgates, capital will largely the existing ‘accredited investor’ class. The SEC could flow to inexperienced inventors and project decide to significantly loosen the rules, which would managers. Crowdfunded projects have a history likely attract billions of dollars. However, there are many of unanticipated delays as inexperienced concerns about investor protection, disclosure and the teams struggle with project deadlines and potential for fraud79. If regulators don’t alter the rules manufacturing details81. Some research suggests in a meaningful way, or if they add new barriers, the that crowdfunded opportunities are a bigger equity crowdfunding market is likely to remain small. risk than traditional IPOs, and that the potential It is unclear at the time of writing what the outcome of for the average investor to misunderstand or the SEC process will be, or even when a decision will be misinterpret the promises of an early‑stage made: it was supposed to be by January 2013, but by startup are higher than for an experienced mid‑December, there were media stories suggesting that accredited investor82. deadline will not be met80. There are also risks for those who participate in reward‑based projects. The time elapsed between contributing money and receiving the reward or product may not be very long, but it is longer than scooping a similar item off the shelf of a retail store, and during those few weeks or months the funded product may become obsolete, as happened for some iPhone‑related projects when Apple switched to a new kind of connector83. In the computer gaming industry, crowdfunding portals could be an important source of funding – primarily for smaller titles that need millions of dollars, not hundreds of millions84. But given the uncertain nature of the creative process, many game projects never get finished, take longer than expected or need more money. Crowdfunders are unlikely to be happy with any of those outcomes85.18

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The button stays beautifulA growing range (tens rather than hundreds) ofhigh‑end TV sets are likely to incorporate gesture The computational challenge of voice andor voice based controls in 2013, Deloitte predicts86. gesture recognitionHowever, while the vast majority of consumers Digital computers are optimized for precisepurchasing a TV set with gesture or voice capability and fast numerical calculations. Numbers andwill try out the functionality, more than 99 percent text are easiest for computers to process: theyof those that use it may, in the medium term, revert are 100 percent deterministic. Phrases andto a standard remote control, due to the unreliability, sentences are slightly less so. Next in theimpracticality or physical effort of using voice or gesture hierarchy of data is sound, including voice.control technologies. Images are even less deterministic and video is a whole other story, due to motion andManufacturers offer gesture and voice recognition for time. Getting a device to understand that atwo main reasons. First, vendors need to differentiate person wants to change the channel whiletheir offerings: the user interface is a key differentiator. someone else in the room wants to petSecond, and related to this, because it is more the cat, or the cat is chasing a fly, and noteconomically possible: the cost of providing gesture directing the TV to raise the volume is farand voice recognition is constantly falling, thanks to more complex. It will most likely happen inMoore’s Law. time, but not imminently. The challenge is algorithmic. Animal brains are constructedGesture and voice recognition work on similar principles: as neural networks which are weaker thansensors detect arm movement or a viewer’s voice, and computers at precise numerical calculations,then translate that into a command to the TV using but specialized at mapping something to ‘justcomputing hardware and software. The devices compare like’. This is largely a consequence of avoidingmotions or noises to a database. The larger the database predation: humans don’t have to see an entirethe quicker and more accurate recognition can be87. lion or bear in a specific pose to know to runProcessors get steadily faster, and memory gets ever away. A machine optimized for arithmeticbigger at the same price point. Moore’s law matters does less well with ‘fuzzy’ conclusions.particularly for gesture control, because movement is To give an idea of the scale of the gesturemuch more difficult for a computer to interpret than voice. control challenge, computationally and algorithmically, problems generally scale in complexity much faster than data bandwidth. If video occupies 50 times more bandwidth than voice, significantly more than fifty times additional computing power will be required to process video recognition relative to voice recognition. Technology, Media & Telecommunications Predictions 2013 19

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The appeal to vendors of gesture and voice control It seems probable that in 2013, and most likely for is likely to increase over time, particularly as devices many years to come, the remote control will retain become more complex and the range of functionality majority (and often absolute) control of the television accessible via a television set or home computer rises. set, even if gesture and voice control are used and are successful in other areas of the living room. The simple Standard remote controls, when used with the latest but fundamental reason why very few TV sets, including multiple function TVs, may oblige the viewer to navigate high‑end models, will be controlled by voice or gesture through multiple screens of electronic programming comes down to three factors: how most TV sets are guides (EPGs) to get to the intended channel, or through likely to be used, accuracy and practicality. numerous menus to access the desired function. Finding a specific program from a large library is even It is easy to predict that at the same price point the more cumbersome with a standard remote control. 2013 model of a given TV set will boast an enhanced level of functionality versus the 2012 version. Gesture control could also be used to interface with the Most models of technological devices, from cars to television, for example allowing children to interact with irons, are improved each year through the addition of educational programs, much in the same way as games new features. This generally helps sell the latest model. console vendors have incorporated motion detectors for But usage patterns change remarkably little. Deloitte’s games play. expectation is that in 2013 the majority of TV sets sold, or used in living rooms, will be predominantly employed One weakness of the remote control is that it is easily to watch television programs and movies. They will not misplaced, usually to be found under the sofa or behind primarily be used to browse the Internet, play app‑based a cushion. Voice and gesture, meanwhile, are always games or listen to music88. at hand. Deloitte’s expectation is that the most commonly used applications for TV set controls will therefore be to change volume and channel, and that the medianIt seems probable that in 2013, and frequency of usage of the remote control will be dozens of times per hour, with the frequency changing inmost likely for many years to come, proportion to the quantity of ad breaks in the channelthe remote control will retain majority being watched. While TV remote controls typically have dozens of buttons, just four of these should be sufficient(and often absolute) control of the to provide the majority of control required. A standard remote control, with buttons ergonomically positionedtelevision set, even if gesture and voice to enable easy, accurate control of volume and channel,control are used and are successful in does the job. And not just a reasonable job; it almost never fails. A modern, standard remote control isother areas of the living room. 99.999 percent accurate89. If remote controls were not that accurate, we would be less inclined to moderate volume or change channel. In households with digital video recorders (DVRs), we would likely pause live TV less often and record less programs.20

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Deloitte estimates that the rate of false positives ornegatives for gesture control on televisions or other Bottom linedevices will be about 10 percent in 201390. That is Gesture control – like audio control – is not impossible. But in 2013 it mayroughly four orders of magnitude, or ten thousand be a hard and possibly overly expensive challenge to solve. In addition,times greater, than traditional remote controls. some might argue it is a problem that does not require an urgent solution.Most consumers would not tolerate this level of The television set should evolve constantly but in 2013 the improvementsinaccuracy for long. They would quickly go back to the and innovations that consumers may be most willing to pay for might relatestandard, button‑based remote control. to other aspects of the TV set, such as size, weight, depth, bezel, picture quality, sound or value for money.Voice control can be far more accurate – as discussedearlier it is a lesser computational task to interpret Every improvement to a television adds cost. TV set vendors – and anyspoken commands where large databases of a other vendor considering incorporating voice or gesture control in itslanguage exist. However, to prevent the incidence of device – should carefully cost the impact on a set’s bill of materials thatfalse positives, where a fragment of a conversation is adding accurate gesture and voice recognition would add. Accurate gesturemistakenly interpreted as a command, the viewer may recognition that works in dimly lit conditions may require additionalfirst need to speak a control phrase, which is a sequence processing capability, new cameras and other sensors in the television.of words that would not occur in normal conversations This could add tens of dollars to the cost of components. Customers mayto alert the TV to listen out for a command. This would prefer to trade off larger screen size in lieu of gesture recognition.work well on an occasional basis, but not dozens of The incremental cost of the components required for gesture recognitiontime an hour. may mean that only high‑end sets, the price of which may absorb the cost of additional materials, will offer this functionality.Over time gesture control and voice control will becomeincreasingly accurate. The efficacy of gesture control in Gesture and voice control are excellent technologies, but are only usefuldimly lit rooms should steadily improve and the need when in the appropriate context. Voice recognition to control functionality,for viewers to be a specific distance or angle from the such as calling a single number from a list of hundreds, works well in carsTV set should lessen91. Gesture and voice may become because drivers’ hands are firmly attached to the wheel or gear shift. But onthe fastest way to access specialized functionality on the couch at home viewers’ hands are typically free and the standard remotea video‑on‑demand menu. But if gesture and voice are control does the job just fine.to be dedicated to specialized or rare tasks, the nextchallenge will be to train users to memorize specificcommands or movements for each of the potentiallyhundreds of functions a modern TV set offers.Users may find it easier just to scroll through the menu. Technology, Media & Telecommunications Predictions 2013 21

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4K kicks off Deloitte predicts that in 2013 the television industry Demand for 4K will likely grow over the medium‑term, will commence the roll‑out of the next generation fuelled by rising expectations of higher resolutions of high definition (HD) TV, known as 4K, which will across all screens, as well as larger TV sets and next offer four times higher resolution than the current generation games consoles. A growing range of highest standard HD92. It may be 18‑36 months before smartphones, tablets and computers offer sufficient 4K is technically and commercially broadcast‑ready, resolution for individual pixels not to be discernible 97. but 2013 should see several significant landmarks in With a 40 inch 4K television, pixels would be hard to see preparations: close up, and disappear from about a meter. • about 20 4K TV set models from more than ten The average size of TV sets will likely become steadily vendors should be available by year‑end93; larger. As this happens, the need for more dots to fill larger screens will grow. ‘Standard’ HD on an 80 inch • the first consumers should take delivery of 4K TV sets; screen viewed from about three meters away would present a pixelated image. • a range of 4K content will become available, initially blockbuster movies; Advances in video games could also drive demand for 4K. In 2013, powerful PCs with sufficiently fast Graphics • a growing range of professional and semi‑professional Processing Units (GPUs) should be able to work with 4K 4K cameras should become available; TV sets. In subsequent years, new generations of games consoles might ship with 4K support98. • new supporting standards should be agreed, including a new high definition multimedia interface (HDMI) While 4K TVs may be a medium‑term purchase standard to service 4K data rates; and for mainstream consumers, wealthy early adopters should be able to satisfy their 4K needs in 2013. • multiple test broadcasts are likely, with commercial The commercial range of 4K TV sets should grow from services expected 2014/201594. a handful in 2012 to about 20 models by end‑201399. At least half of these sets may be available for under The roll‑out of any new broadcast standard is a major $10,000100. Over subsequent years, the price of 4K TV step, so the expected landmarks for 2013 should be sets is likely to drop steadily and significantly. With every considered significant. price decline the accessible market should increase101. Within five years if not before, smaller (about 50 inch) That said, many commentators are likely to question 4K TV sets might be available for under $1,000. The cost the need for a new version of HD95. After all standard of manufacturing 50 inch 4K TV sets is expected to be definition (SD) TV remains the most popular resolution about a third of the price of making 80 inch sets102. globally – even for satellite TV customers, who have access to most bandwidth96.While 4K TVs may be a medium‑term purchase for mainstreamconsumers, wealthy early adopters should be able to satisfy their4K needs in 2013.24

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4K TV set owners will need to rely on pre‑recorded or In 2013 the first connectors supporting 4K data ratesstreamed content in 2013: no broadcast services are should be available, based on the HDMI 2.0 standard106.planned. But there should be a good range of movies Over the past decade, the HDMI standard has beenavailable to watch. Many blockbusters launched regularly enhanced107. Prior to the introduction of anin 2012103 and 2011 were digitally captured in 4K. upgraded connector, cable connecting a source to aAbout fifty films have been screened in 4K and films 4K TV will require four parallel high definition mediashot in 35mm can be scaled to 4K. Most major films interface (HDMI) connections, which may be consideredsince the early 1980s were shot in 35mm. inelegant in a domestic setting108.In 2013, commercially available eight‑layer Blu‑ray A key landmark for 4K in 2013 should be testdiscs, with 200 gigabyte (GB) capacity (sufficient for a broadcasts, following initial trials in 2012109.compressed 4K film) may become available. The first The broadcasts should prove useful for optimizingeight‑layer prototype was announced almost ten years considerations such as frame rate (the number of stillago. Multi‑layered discs are needed because a single images shown per second to create video effect) byBlu‑ray disc, with 25 GB of memory, would be too small genre. Broadcasters will need to balance minimizationto store an entire movie104. of bandwidth requirements while maximizing viewer experience. For sports, the frame rate may need to beStreaming 4K content may also be challenging: with 120Hz to provide a fluid picture with no blurring: withuncompressed files a user would require a half gigabit higher resolutions image blurring is more visible, makingper second (Gbit/s) connection. Downloading an 60Hz transmission less viable. Sport is likely to be oneuncompressed 4K movie would take days over a of the genres most likely to be captured in 4K given itsstandard broadband connection105. But few consumers strong commercial appeal, but it may require a higherwould ever download an uncompressed file. A one hour bit rate110.compressed 4K film is about 160GB and would takeseven and a half hours to download on a 50 Mbit/s A relatively small set of broadcasters may experimentbroadband connection. with 4K. But, as costs fall involvement and interest should steadily rise, reflecting what has happened in HD111. In 2013, a growing range of dedicated 4K cameras may become available, adding to the existing range of 4K cameras, which include digital SLRs112. As the supply of cameras rises, prices should fall, making 4K more appealing to a higher number of broadcasters113. Technology, Media & Telecommunications Predictions 2013 25

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Bottom line The upgrade to 4K entails significant capital expenditure for broadcasters, producers, television manufacturers, infrastructure owners and consumers. It is not a move to be taken lightly. The cost for broadcasters of creating a 4K channel, factoring in upgrades to existing equipment and infrastructure, could be $10 million to $15 million. In future years the costs will decline. Currently an HD channel costs about $2 million; a decade ago it would have cost about $10 million. The top estimate of $15 million for 4K may seem high, but broadcasters should remember television’s commercial success is predicated on its ability to distribute high production costs across a large audience, resulting in a reasonable cost per viewer. A major television event costing $10 million to stage and watched by a billion people costs one cent per viewer. Broadcasters evaluating 4K should also note that 4K subscribers would need a new set top box to support the new High Efficiency Video Coding (HEVC) compression standard114. These would need to include larger hard drives to cope with bigger file sizes. Set top boxes might need about four terabytes (TBs) of storage, though by 2015 hard disk storage prices may have fallen to about $15 per TB. Initial customers for 4K services are most likely to be relatively price insensitive to service costs; service providers should be predisposed to upgrading these clients’ customer premise equipment (CPE) for no or little cost. One of the major bottlenecks to offering 4K services will be bandwidth. Broadcasters should consider how much they are likely to need, and must have a handle on likely improvements in 4K compression. In 2013 4K could require up to 40 Mbit/s; by end 2014 it should require as little as 20 Mbit/s, equivalent to the bandwidth requirements for the first standard HD transmissions in 2005, and the first 3D TV transmissions in 2010115. Satellite‑based broadcasters should be in a good position to offer 4K. Satellite capacity is growing steadily116. 4K test transmissions via satellite links are expected in 2013117. Terrestrial broadcasters may have less bandwidth at their disposal. They should consider whether they need to request more spectrum to enable 4K broadcast. They are likely to face strong competition for available spectrum. Companies offering IPTV services should consider 4K’s impact on the case for rolling out fiber to the home (FTTH). Program makers need to balance the investment required against potential returns. One consideration is viewing figures. According to one analysis the higher the resolution of the program being watched the less likely the viewer is to change channel118. For TV manufacturers, one attraction of 4K is that it could provide a motivation to upgrade existing sets 119. Some commentators may question, however, whether 4K provides sufficient incentive to buy a new set. 4K’s unique selling point – the intensity of its resolution – loses its uniqueness once the viewer is a certain distance from the TV set. In other words, the visual quality of 4K is most evident when in close proximity to the TV set. Yet few watch television in very close proximity. The first owners of 4K TVs in 2013‑2015, shortly after purchasing their set, might hold “pixel parties” at which friends and family are encouraged to view some 4K footage from close proximity – about a meter away. They may be asked to try and spot an individual pixel. This experience – should individual pixels prove impressively elusive – is likely to provoke admiration and envy, and possibly catalyze further sales120. Thereafter the set will be watched from normal distance, but the memory of the quality of that close encounter will likely linger. This ritual is likely to resemble when new owners of high resolution tablet computers and smartphones take ownership of their new devices121. TV manufacturers will need to determine what the optimal size of 4K TV sets should be. 4K’s impact may be more evident on larger TV sets, but the larger the set the higher the cost of manufacture, limiting the market for such TVs. Manufacturers should also consider other markets for large, high resolution sets, particularly the commercial market. Initial sales of larger 4K sets are likely to be sold to large companies for boardrooms and meeting rooms. The visual quality of a presentation delivered on large, high resolution sets may be higher than that for an overhead projector, and may in some cases be cheaper, when factoring in the cost of a high quality projection screen. 26

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Dual video screening readiesfor prime timeDeloitte predicts that in 2013, about ten percent of However this presentation of images has had littlehouseholds in developed countries, and about three take‑up, as the smaller image has been unsatisfactorilypercent of households in developing countries, will dual small and the larger image unsatisfactorily compromisedvideo screen their television consumption on a monthly by the former, leaving both sets of viewersbasis. That is, they will have two (or more) screens, most dissatisfied123. Dual video screening also replicates thelikely of different sizes, showing television programs at work place environment for millions of workers aroundthe same time and in the same room. These television the world who work with two or more screens on aimages may be separate programs or alternate streams regular basis.of footage for the same event, such as differentmatches in the same golf tournament. The growing availability of ‘over‑the‑top’ (OTT) program and movie demand services has per theBy the end of 2013, time spent dual video screening law of unintended benefits enabled the ambition ofcould exceed the time spent consuming the picture‑in‑picture to be realized, but through the offer ofcombination of a television program and its dedicated picture‑and‑picture. Over‑the‑top is access to premiumprogram app or website. content via the Internet on any connected device, marketed as enabling subscribers to consume anywhereThe key driver for dual video screening is simple: just (known as TV Anywhere or TV Everywhere). As take‑upone television stream may be insufficient for the person accelerates it is likely to be used to consume contentor people in the room. There are likely to be two main in the same room as the main set‑top box. Free‑to‑airreasons for that being the case. TV broadcasters’ OTT offerings would also facilitate simultaneous consumption of two or more videoFirst, there is a desire among household members streams in the same room.to spend time together. Watching television is inmany homes a principal family activity. However, it Another reason for dual video screening is to satisfyis sometimes difficult to agree on what to watch. viewers’ desire to consume more of a particular pieceOne solution is to watch two separate programs and of content. This is likely to be particularly prevalent withthat is most easily achieved on two screens. sport, in which multiple simultaneous events might have a bearing on the outcome of the principal video stream.In 2013, most dual video screening will be based on A motorsport race, for example, is an edited highlighta combination of traditional TV set and a connected of as many as dozens of cameras. Traditionally, viewersdevice, most frequently a laptop, but also possibly a have only been able to view one image at a time,tablet (among the minority of individuals who own often the contest for the lead or a leading position.one) and occasionally a smartphone. One person or TV coverage of tennis tournaments typically only showsmore will watch and listen to the main TV, while the the match the producer believes the majority of viewersother (or others) will watch on the smaller devices and want to watch. Yet a motorsports fan may also want touse headphones. watch the progress of a favored driver and a tennis fan a preferred player.Deloitte’s prediction is that the smaller screen will oftenbe used to watch sport – reflecting who has real control For major events, viewers may be able to chooseof the remote in the household. Dual video screening between a range of cameras, but selecting whichenables families to spend time together, without camera to watch may be a little slow and labored.compromising on what to watch – even if those on the Dual (or multiple) video screening enables the viewersmaller screen may not be entirely happy. to flick quickly – far faster than would be possible through physically changing channels – from one set ofDual video screening in this manner realizes a events to another. Deloitte predicts that during majorlatent demand that has existed for decades122. sports events for which multiple streams are available,Television manufacturers have long offered the ability up to ten percent of households will be using multipleto watch two television images, through installing two screens in the same room in 2013, with the secondtuners in a TV set and placing a smaller picture in the (or additional) screen being a connected device or amain image (picture‑in‑picture). second television set; for example one brought in from the kitchen. Technology, Media & Telecommunications Predictions 2013 27

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Multiple video screening of the same content does not Still, a decade from now some readers may well look mean viewers will necessarily watch more television, back nostalgically on an era when they just had one although it is likely they may watch the same event TV set on the wall; much as some workers, particularly for longer. Multi‑screening viewers may watch more those working with data, may remember a time when attentively, in the same way that chatter about a program they had only a single monitor to analyze. on social and other networks ratchets up the intensity and buzz associated with consuming a program. Deloitte expects that dual video screening of the same Bottom line content in the first half of 2013 will be dominated Broadcasters, who are likely to remain unsure by combinations of TV sets and smaller connected of how best to monetize any form of dual devices, with the latter often positioned on the viewer’s screening, may want to consider video streams, lap. Thereafter, second TV sets and larger computer which do not necessarily require the creation monitors may start to predominate and are likely to be of additional content. Existing distribution positioned adjacent to the main TV set. A key reason architectures can also readily cope. for this will be ease of use: it is easier to view two video Licensing arrangements permitting the viewing images by moving the eyes from side to side than to of content on any device – agreed for the launch move the head, and changing focus, from nearby on a of over‑the‑top services – have long been in small screen to a larger screen several meters away. place. The falling cost of principal and ancillary cameras means there will be even more footage Looking to the longer term, Deloitte’s prediction is to select from. The marginal cost of hiring an that by 2020 between five to ten percent of homes in additional producer to curate secondary video developed countries will have a second large TV set in feeds may be lower than the cost of building an their living rooms, primarily to facilitate secondary video app or website for a program – and is also closer viewing. The second set is unlikely to be used for every to the average broadcaster’s core skill set. program – or indeed even for the majority of programs – but for major sports events, and for when families Dual video screening’s prospects should not be want to spend time together, and agree to disagree equated with picture‑in‑picture’s disappointing over what to watch. Second TV sets are also likely to be take‑up. Both approaches attempt to serve used with households with games consoles to enable the same need, but the user experience for multiple‑player games play. picture‑and‑picture, using current technologies, is far superior to the fundamental compromise of A second large TV screen is likely to be better value picture‑in‑picture. for money than splitting a very large screen into two side‑by‑side images: even today the cost of a 42 inch TV For those who think that having multiple screen is less than $400, which is less than ten percent screens in a room is too intrusive, tolerance of the cost of an 80 inch screen, and about a third of the TV’s physical impact in the home is remarkably price of a typical 60 inch screen124. It is worth noting high and is growing; we accommodate what that a 42 inch screen is also cheaper than many ten inch we find valuable125. In Hong Kong, a market tablet computers, and with 21 times the screen area: characterized by relatively small homes, the per square inch as well as per hour of consumption, fervor for TV‑based karaoke systems pre‑dated television is likely to remain excellent value in 2013 and the arrival of flat screens. Karaoke fans were in the long term. Further, the weight of two 42 inch proud of karaoke systems based on large television sets can be a quarter that of a single 80 inch cathode ray tube (CRT) sets that were as deep as television set and would be distributed over a larger area screens were wide. with more mounting points. Two screens are also much less likely to require strengthening of the supporting wall. Advertising‑funded broadcasters and media agencies should consider the impact that dual Over the past decade consumption of TV has risen or multiple video screening will have on the steadily in many markets, with some currently averaging measurement and impact of advertising. five hours’ viewing per day, equivalent to more than a quarter of waking hours. The TV set has also become an ever‑larger physical presence in the home.28

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Connected TV: hits and missesIn 2013, Deloitte predicts that tens of millions of The effective base of connected TV households is soconnected TV sets will sell globally, and the installed high because there are multiple ways by which a TVbase of TV sets with integrated connectivity should set can be connected. TVs can be connected via aexceed 100 million126. By the end of the decade, the vast wide range of peripheral devices, many tens of millionsmajority of new TV sets sold in developed countries will of which around the world are likely to already belikely incorporate two‑way connectivity127. However, this permanently connected to the TV. Current generationmay be because it will have become nigh impossible to games consoles, set‑top boxes and Blu‑Ray playerspurchase an un‑connected TV set, much as it is the case typically have two‑way connectivity built in and, inthat in developed countries it is very hard to purchase a most homes, they are permanently connected to TVbrand new cathode ray tube (CRT) TV set. sets. These peripherals often offer dedicated menus and apps to access movie and TV on demand services.But despite the forecast boom in sales, only a modest The principal usage of connected TV tends to be toproportion of connected TV sets sold in 2013 and access more content. So households whose TV set isbeyond – 15 percent at most – are likely to be attached to a peripheral with two‑way connectivitypurchased solely or primarily for their integrated would not need to purchase a connected TV to accesstwo‑way connectivity 128. In the vast majority of cases video content on‑demand.price, size, thinness or bezel width are likely to be theprimary reasons for purchase. Other devices that may not be constantly connected to a TV set can also make a TV “connected”.Most customers purchasing connected TVs are likely Laptops, tablets and high‑end smartphones can allto regard two‑way connectivity as a welcome bonus. be connected to a TV set, via a wire or wirelessly.Some might be indifferent129. Some may struggle to The installed base of these devices numbers over threeaccess the functionality. A few might feel put out at billion globally. Modern laptops often incorporatehaving to pay for functionality which they have no high definition multimedia interface (HDMI) ports thatintention of using, or to which they already have access. provide simple‑to‑use, high‑definition (HD) connections to TV sets; tablets can connect via wires or via a Wi‑FiA key reason why connectivity per se is unlikely to connection; phones can connect via mini HDMI orbe a key selling point for new TVs in 2013 is because wirelessly. In short – there are already myriad ways andhundreds of millions of households around the world billions of existing, owned devices that can enable a TValready have one or more ways of connecting their TV to become connected.sets. In at least ten countries around the world, over30 percent of households already have connectedTV – even if in some cases they may not realize it130.In a few markets – those with high broadband and PCpenetration – the effective connected TV base may bedouble this, at 60 percent of households131. Technology, Media & Telecommunications Predictions 2013 29

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It should, in practice, be easier to use on‑demand TV In summary, the base of households supporting two‑way and movie services on a TV set with built‑in two‑way connectivity is already vast; the usage of that connectivity connectivity. After all, laptops, tablets and smartphones has remained sparse. Connected TVs will sell, but most may be out of the house at the time when someone likely primarily for the thinness of their bezels, the wants to watch connected TV. But the greater sharpness of their screen or their value for money. ease‑of‑use would only be a significant differentiator if viewers were to use connected TV services frequently. In practice, connected TV sets are likely only to be used occasionally to play online games, browse the Internet, Bottom line download apps, or even video conference; the principal In 2013, because of the volumes of connected TV usage of a TV set is likely to remain to watch TV sets sold around the world, the implications of programmes and movies. Usage of TV‑on‑demand connected TV – chief among which is the ability is rising but is likely to remain a small proportion of to disintermediate traditional broadcasters, overall TV viewing. The majority of programs and films or even traditional TV content – will likely that people watch in 2013 will likely be available and be the subject of intense, and occasionally consumed via broadcast terrestrial, satellite or cable. under‑informed, debate at conferences focused on the TV sector132. In the majority of cases, broadcast quality and broadcast programs recorded to a DVR should be better than that But the bottom line is that unless must‑see which is available online. The Internet’s rivalrous nature content at a competitive price point is made should never be overlooked: it is a shared resource. exclusive to connected TVs, for example via Your neighbor’s use of the Internet may affect the a channel or portal that is only available via quality of service in your home. If bandwidth is scarce connected TVs, the need for connectivity in in your neighborhood, this may compromise your ability televisions is likely to remain marginal. to watch TV‑on‑demand, particularly when the pictures are being shown on a large TV screen, rather than a TV manufacturers do need to consider ways medium‑sized laptop screen, or a small smartphone of differentiating their products. They do need screen. Broadcast, by contrast, is a non‑rivalrous service, ways in which to boost the often tight margins and everyone in your street or block can be consuming that characterize the industry. But they should TV pictures with no impact on your quality. also determine precisely which functionality and features customers are most likely to value. Broadcasters, in considering which services theyIn the majority of cases, broadcast should offer, should keep track of the installed base of devices on which their content could bequality and broadcast programs recorded received and consumed. And they should also monitor carefully the extent to which new formsto a DVR should be better than that of consumption grow in popularity.which is available online.30

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Over‑the‑top may lift legacy broadcastersand distributors more than pure playsDeloitte predicts that in 2013, in markets where services Another factor expected to drive demand forare available, two of the top three over‑the‑top (OTT) TV broadcasters’ OTT services is awareness: the majorityprogram and movie services are likely to be provided by of viewers will have been exposed to the broadcasters’existing broadcasters and distributors. brand for decades: the OTT service is a natural and seamless extension of that brand. Broadcasters are alsoOTT services use the Internet to distribute TV and likely to promote their own OTT brands regularly over themovie content to homes. Any company can provide typical 3‑5 hours viewing of broadcast or pre‑recordedOTT TV and movie services and many do so, including TV that the average citizen with access to televisionTV broadcasters, device manufacturers and fast food watches daily. Over the course of a week a viewer wouldvendors133. Pure play OTT providers and OTT divisions likely see dozens of promotions for broadcasters’ OTTof larger companies not in the TV industry are likely services. Pay TV providers and subscription channelsto enjoy growing market share and take up, but in are likely to continue to promote their OTT services tomost markets their active paying subscriber base improve perceptions of value for their services.will probably account for less than ten percent ofhouseholds. The market is shaping up to be dominated OTT pure plays and divisions of larger companies startby existing players. from a much smaller audience base than broadcasters. In some cases their brands may be entirely new toCombined OTT revenues for existing broadcasters and the market, niche or in an adjacent or even unrelatedpure plays are likely to be less than two percent of space137. OTT pure plays, as recent entrants to theearnings (from subscriptions and advertising). Free‑to‑air market and with limited access to current programming,TV broadcasters are likely to offer OTT for free, while pay may have to rely primarily on archive content. They mayTV companies are likely to include OTT access as part of lack the call‑to‑action appeal of broadcasters’ OTTsubscription packages. Total global revenues from TV services.advertising and subscriptions are likely to reach about$400 billion in 2013134. Some customers will willingly subscribe to OTT services based mostly on archive content. For someThe two factors underlying the popular appeal of the ability to access box sets of TV series at a pricelegacy broadcasters’ OTT services are brand and point that is typically much lower than pay TV maycontent. Most viewers are likely to remain faithful to be exactly what and how they want to consume TVthe broadcasters and programs they have watched in programs. For others, watching every episode of aprevious years, so long as those broadcasters continue series sequentially may be akin to consuming dozens ofto provide the type, quality and quantity of programs breakfasts in a row.that viewers like. Viewers will likely remain averse tonew sources of content in 2013, due to the opportunity The consumption of programs and movies via OTTcost of taking time to watch a program they may distribution is likely to remain small in proportion to totalnot enjoy. consumption138. The vast majority of viewers in 2013, and in subsequent years, are likely to continue to defaultViewers will mostly use broadcasters’ OTT services to to broadcast and the TV schedule, before checking whatcatch‑up on programs they were unable to watch or is stored on their Digital Video Recorder (DVR) beforewere unaware of when first broadcast. Viewers will finally accessing OTT services.generally watch programs via OTT very shortly after firsttransmission: hours for sports and news, up to a day Deloitte’s expectation is that even in markets withfor reality, soap operas and dramas and about a week extensive broadband roll‑out, on‑demand TV andfor documentaries135. The freshness of content is likely movies will largely represent only a few percentageto be key to popularity: although some portion of OTT points of total viewing, whether this is via broadcasters’viewing will be ‘long tail’ (shows that are more than a pay‑TV companies or pure‑play OTT provider sites.week old). Deloitte estimates that more than 75 percent Further, official on‑demand TV and movies sites areof programs will be watched within a week of initial likely to represent only a few percentage points of totalbroadcast136. online video. Technology, Media & Telecommunications Predictions 2013 31

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Bottom line The reality of OTT for the majority of households is likely to be as part of the ecosystem of television services provided by either pay‑TV companies or free‑to‑air broadcasters. OTT access has now become a standard and occasional means of accessing TV content. In markets where it is available OTT has become a fundamental TV technology, similar to digital video recorders (DVRs) or electronic program guides (EPGs.) OTT’s principal role is likely to be to enable catch‑up, rather than to create a bespoke ‘channel’ of TV content. OTT is important, but not core. If OTT services were to be suspended for a week, people would still watch television. What is core is content, and whichever entity has access to the most popular content is likely to have the most popular OTT site. The OTT service itself is likely to remain a sub‑brand, and not a separate brand of free‑to‑air or pay‑TV providers. It is more likely to succeed as a sub‑brand, rather than a new identity which viewers are unfamiliar with. Deloitte expects that in 2013 all OTT players are likely to continue to grow, at least in usage terms, but there is likely to be significant press coverage of the progress of pure play OTT companies and OTT divisions of larger companies that are not broadcasters or content producers. Broadcasters and pay TV companies should analyze and contextualize these headlines and react commensurately. OTT providers should note that the quality of a consumer’s broadband service will have a key impact on quality of service. OTT pure plays and divisions of larger companies need to balance whether to invest or use services that offer guaranteed quality of service, e.g. sufficient, protected bandwidth into a home to ensure uninterrupted viewing. But in some markets local regulations may prohibit certain types of traffic to be prioritized in this way. If traffic cannot be prioritized adequately, OTT services could suffer interruption. When this happens, broadcasters and pay TV companies must have fall backs – such as standard broadcast and DVRs. OTT pure plays would not be able to offer that service. In the medium term, as televisions become larger and have higher resolutions, HD transmission may be required to ensure sufficient picture quality. In some markets bandwidth may be insufficient to support HD. And in the longer term, as 4K transmissions – which offer four times the resolution of current HD – become mainstream, faster broadband networks will be required. Another medium term consideration is the convergence of DVRs and on‑demand. As hard disk storage becomes steadily cheaper, DVRs can become de facto content storage nodes. Initially a multi‑terabyte DVR with multiple tuners may record the five main channels’ prime‑time broadcasts. If someone in the household misses a program, playback could be from the DVR, rather than via the Internet. In this scenario, pure‑play OTT providers may face additional barriers to entry into the mainstream television ecosystem.32

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The reality of “cord cutting”in North AmericaDeloitte predicts that in 2013 almost all North American It is important to stress that in 2013 and most likelyhouseholds that pay for TV through multichannel video for several years to come the North American pay TVprogramming distributors (MVPD)139 will continue to market will be substantially different from other TVsubscribe. Less than one percent of subscribers will markets. What happens or fails to happen in the Northdiscontinue their pay TV subscription (also known American market may or may not provide lessons foras ‘cord cutting’). That small number of cord cutters other markets.will likely be driven by a mix of: macroeconomicconditions, a perceived lack of value of pay TV, growth Outside of North America, over‑the‑air (OTA) TV viewingin over‑the‑top (OTT) video services and changing TV hours are lower144 and there may be national TV licenseconsumption habits. fees145. Most importantly, rates of pay TV penetration vary widely around the world: in the United States andThis reality is likely to contrast starkly with various Canada about 90 percent of homes pay for TV, whereasapocalyptic headlines suggesting imminent, significant in EU countries the proportion is 35 to 60 percent.cord cutting. These headlines will often be based on In South Korea the rate almost 100 percent and in Brazilonline surveys whose responses – however honest when is less than 30 percent146. But if there is no evidence ofgiven – do not always equate to outcomes. In one cord cutting in 2012, is there any reason to think that it2012 survey, 31 percent of respondents said they were could happen in 2013 or beyond? And if so, how largeeither planning to or seriously considering cancelling could it be?their subscriptions, primarily because of the availabilityof OTT services140. Predicting pay TV subscriptions in North America is complex. Key variables include economic growthHowever survey data can be wrong: reported subscriber and consumer confidence147, the rate of householdnumbers from the various MVPD providers show a net formation148, content deals for the forthcoming season,rise in subscribers in the last two years. the propensity of some consumers to have more than one kind of pay TV service at the same time, andOTT Internet TV services and pay TV are often competition/substitution from other formats, such ascharacterized as mutually exclusive competitors; OTT pure plays.the reality is that they are often complements141.US MVPD subscriptions were up 135,000 in the four Extrapolating a view on cord cutters from this complexquarters ending the third quarter of 2012, an increase mix is challenging. However, based on the most recentof 0.1 percent142. Canadian broadcast distribution quarterly data from the United States and Canada, andundertaking (BDU – the equivalent of MVPD in the assuming the variables have been more‑or‑less constant,United States) subscriptions increased by about the rate of subscriber additions has been slowing.136,000, or 1.2 percent, in the same period143. Growth in US subscriptions was running at more than 1 percent year‑over‑year in 2009 and 2010, but fellHowever, the pay TV market contains many to 0.1‑0.2 percent in 2012149. In Canada, growth wasmoving parts which vary: over time, by geography about one percent for most of 2010 and 2011, but hasand by delivery technology. Individual cable, fallen to 0.3‑0.4 percent in the most recent quarters150.telecommunications or satellite providers gainand lose subscribers to each other every quarter. Based on the trend lines, and if there is no dramaticIndividual subscribers may cancel a service, then rejoin increase in household formation, it seems probable thatonly a few months later, either with their original the number of total pay TV subscribers could be flat, orprovider, or another pay TV player. The focus of this even fall in North America in 2013. Further, some havePrediction is on total net subscriber numbers for all speculated that a proportion of young people creatingforms of pay TV. new households are doing so without traditional pay TV: not cord cutters, but possibly ‘cord nevers’151. The size of this group is unknown, but if significant could lead to a fall in the percentage of homes paying for TV, even if the absolute number of homes is more‑or‑less flat. Technology, Media & Telecommunications Predictions 2013 33

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Still, subscribers who do not renew their subscriptions Further, those who don’t watch a lot of sports tend to are likely to be drawn from a very narrow pool. In North watch a lot of reality, news and first‑run comedy and America the categories of live spectator sports, news, drama. Few households watch none of the categories. reality TV, first run drama and comedy constitute the ‘four pillars’ of pay TV and are generally not available In 2013, given the exclusive content ownership by through third‑party OTT alternatives. The proportion of MVPD and BDU distributors of the four pillars, a households in North America with at least one family maximum of ten percent of North American households member willing to pay for TV sports is estimated to be would contemplate cancelling pay TV, and still be able more than 80 percent152. to watch the shows they really want to watch153. That is not zero, but neither is it as large a pool of potential cord cutters as most articles speculate. Bottom line MVPD and BDU providers should note that the loss of a small number of subscribers may not necessarily lead to a fall in revenues or profitability: pay TV providers might be able to increase average revenue per subscriber faster than they lose (usually less profitable) cord cutters. While cord cutting surveys may generate headlines, pay TV operators should probably be more focused on the 99 percent of their customers who are likely to stay, and look to increase average spend and design packages to please them, rather than attempting to appease the small but vocal group of subscribers who threaten to cancel – at least when answering surveys. Further, MVPDs and BDUs have significant power to minimize cord cutting itself and to mitigate the impact of cord cutting: they are often the Internet Service Provider (ISP) that the cancelling subscriber requires in order to access to the services of the OTT provider. They can price a bundle of pay TV services and Internet access such that there is negligible financial incentive to cord cut, even without factoring in additional data usage due to increased streaming. One analysis across multiple operators and in certain regions found that cancelling pay TV offered savings of just $5 per month, relative to an average $90 pay TV bill154. In some cases, cord cutting could end up costing $20 more155. Aggressive pricing of bundles could help minimize cord cutting. Second, many pay TV/ISPs expect cord cutters to increase their data consumption such that they require a bigger, more expensive data plan with faster speeds and/or more data. If cord cutters resemble the overall TV‑watching population, and have two people in a household watching 35 hours per week OTT, that would amount to in the region of 700 GB of data per month156. This increment would require most households to pay more for data and/or speed157. In this way cord cutting may be revenue neutral – and possibly even net positive – to bottom lines. Broadband services in North America tend to be higher margin since they do not have the pass through content costs of pay TV. On the other hand, not all North Americans watch the same amount of TV: the lightest quintile watches about a fifth as much TV as the average viewer (and 90 percent less than the heaviest quintile158). In such a household, and assuming again that they move all their TV viewing to OTT solutions, they would consume only an additional 150GB per month, an amount that in many regions may not require them to pay more for data under the most common plans. Finally, the growth in OTT providers has benefitted content creators: OTT has been a new bidder for content rights, enhancing the value of that content. Given the very small numbers of cord cutters and cord nevers who are substituting OTT for pay TV, it seems likely that the vast majority of money made from selling content will come from the traditional broadcasters and distributors. OTT is a delightful incremental source of revenue, but unlikely to be in the same league.34

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A strong year for LTE adoption More than 200 operators in 75 countries will have The cost of LTE chipsets, which has a significant impact launched a Long Term Evolution (LTE) network by on the retail price of LTE devices, should continue to fall the end of 2013, Deloitte predicts159. By year‑end in 2013. The incremental cost of adding LTE to one of LTE subscriptions should exceed 200 million, a the first LTE‑enabled smartphones was estimated to be 17‑fold increase in just two years160. About 300 LTE about $40169. At year‑end 2012, the incremental cost devices (smartphones, tablets and dongles) should of adding LTE to a chipset is likely to be in the region of be available by year‑end, including a range of $10 and in the range of $5 – $10 range by mid‑2014170. sub‑$100 smartphones. However, it will be a year of momentum for LTE, rather than completion: at the end Realized (as opposed to advertised) LTE speeds of 2013 the vast majority of 1.9 billion smartphone should remain significantly faster (three times faster customers are likely still to use 3G and 2.5G devices. or more) than equivalent 3G networks. However, as LTE networks attract more users, speeds may decline LTE was launched in Sweden in 2009161. Growth has from 20‑30 Mbit/s to about 10 Mbit/s or less171. since been steady but slow, with the exception of the Carriers are likely to balance their networks so that LTE United States, Canada, Japan and South Korea, which performance remains differentiated from 3G speeds. have seen faster take up162. In most countries where LTE For some carriers, up to half of data traffic is expected has launched, 3G and its variants, such as HSPA, have to be carried over LTE networks by the end of 2013172. remained the dominant networks. As of January 2012, In some markets HSPA speeds may exceed LTE speeds, there were just 12 million LTE customers, compared to but in many cases this will be temporary: in the medium more than a billion 3G subscribers163. By mid‑2012, over term, LTE should be faster than HSPA, because providing half of LTE devices had been sold in just one market – equivalent speeds on HSPA requires two to three times the United States164. By January 2013, the number of more spectrum. At the beginning of 2012, actual LTE subscribers might have risen to more than 60 million average LTE speeds recorded in the United States were and by year end subscriber numbers may surpass three to seven times faster than 3G173. 200 million165. Usage of complementary networks (principally Wi‑Fi) Device availability should increase rapidly. At the end of may be little affected by LTE. While LTE is faster and 2011, only 27 LTE‑enabled smartphones and 11 tablets lower cost per gigabyte (GB) than 3G, it is likely to were available166. One year later, over 150 models of remain more expensive in countries with mature fixed smartphones and 50 tablets were on the market167. network infrastructures. In home and office contexts, By the end of 2013, an additional 150 smartphones and it will be slower than fixed broadband networks tablets may have been launched. These will include a accessed through Wi‑Fi routers174. Deployment of small but growing range of LTE handsets aimed at the LTE small cells improves indoor coverage, but there is pre‑pay market, and priced at under $100: as of January not always a business case for this175. In most cases 2013, fewer than ten sub‑$100 LTE handsets models users may gravitate to the fastest, most reliable and will be available. By year end, that number is likely to best‑priced wireless network available: they are unlikely triple. The range of sub‑$100 handsets is significant as it to debate the technical merits of LTE picocells versus makes LTE accessible to a significant target audience. Wi‑Fi. They will leave such discussions to engineers, and those debates are likely to persist through 2013 and Through 2013, there are likely to be tens of millions beyond176. of LTE device owners not on an LTE tariff, as well as numerous individuals on an LTE tariff who do not have In most markets, LTE network coverage is likely to focus an LTE phone. In 2013, at least fifty million LTE devices on cities, where the majority of calls are made, traffic are likely to be sold to individuals whose carrier does not generated and revenues earned. In some markets, have an LTE service, or whose available LTE frequencies operators may be required to build out rural LTE are not supported on that device, or to subscribers coverage as a condition of obtaining a license177. who do not want to subscribe to LTE168. These fifty million will augment the existing base of tens of millions of LTE‑ready devices that may never be used on an LTE network.36

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The migration of speed‑seeking data users to 4G may While LTE networks will be fast enough to supportbe accompanied by a rise in the volume of voice calls video downloads, in most markets LTE will be used onlyon legacy 2G and 3G networks. As data traffic migrates occasionally for video download, due principally to theto LTE from 3G networks, the latter’s capacity is likely cost of serving that capacity and/or data costs to theto get freed up, enabling higher call quality, with a end‑user. LTE is more efficient in carrying data thanlower likelihood of calls dropping. Although technology 3G networks over a given amount of radio spectrum,permits voice calls to be carried over the LTE network meaning that the cost to the operator of carrying a(VoLTE), they are likely to be offered in only a handful of gigabyte (GB) of data on an LTE network should bemarkets, supported by at most a few dozen handsets178. several factors lower than for 3G.In the long term, data usage by LTE customers should Despite LTE’s superior spectral efficiency, it is still likely toremain higher than by 3G customers. In 2012, networks cost about $5 to $10 for a mobile operator to carry 1GBreported LTE customer data usage was between of data, sufficient for about one to two hours of high50 percent and 900 percent higher than 3G customer definition (HD) video streaming or two to four hours ofusage179. Again some of this was likely to have been due standard definition video183.to 3G customers moving their relatively high data usageto LTE networks, and some caused by increased data Some carriers may price LTE at under $5 per gigabyteusage triggered by the availability of higher speeds and in 2013, but this will tend to be to encourage usage.larger data caps180. As they fill up, mature LTE networks are likely to see significantly higher pricing. As of Q4 2012, researchLTE customers are likely to generate significantly higher found a range of $0.66 to $5.50 per GB184. The formeraverage revenue per user (ARPU) than 3G customers. carrier at the lower end of the range had five percentThat is because of selection effect, where an operator’s of its customer base on LTE, while the latter had abouthigher spending customers migrate or are migrated 16 percent of its customer base on LTE185.to LTE tariffs, and consumers being willing to pay apremium for higher speeds181. While LTE is unlikely to be able to deliver live, uninterrupted TV to a bus or train full of commuters onBy the end of 2013 or 2014, revenues from subscribers their way to work at an affordable price186 this does noton LTE tariff plans may have reached about 10 percent mean that LTE is inadequate; it is just not suited to thisof global mobile service revenues, with three to four type of application.percent of the total subscriber base182. However thisdoes not necessarily mean that LTE networks willgenerate a tenth of all revenues. To illustrate, themajority of voice calls made over LTE handsets in2013 are likely to be carried over 2G or 3G networks;LTE handsets on LTE tariffs will still use 3G and 2G ifLTE networks are not available. Technology, Media & Telecommunications Predictions 2013 37

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At the end of the day, LTE isn’t the reinvention of cellular. It is not the transformational shift that was seen Bottom line in the move from essentially voice‑only 2G technology A key question for operators across the globe to voice and data 3G technology. It does not require the remains how to encourage demand for LTE, both effort and cost in educating the customer base what 3G initially and over time. Two of the key levers are entailed. It delivers more data, faster and often cheaper pricing and marketing. – characteristics which many are likely to find appealing and it is likely to encourage them to use mobile for more Carriers need to price LTE services, initially data applications, and more often, than was the case and over time, to encourage customers to with 3G. Browsing a website should be faster and more take advantage of the newly built network pleasurable. Photos captured on a device may be shared while ensuring a return on their investment. at a higher resolution than with 3G, simply because One approach is likely to be shared data plans. the upload for a larger file takes less time. For business The two dominant US carriers offer multi‑device users, e‑mail is still likely to remain a key application, but shared data plans. Subscribers pay a fixed monthly sending and receiving e‑mails with bulky attachments fee for LTE access to a bucket of data which is should be an easier experience, and as such is likely to shared across LTE‑enabled devices, principally be attempted (and accomplished) more often. smartphones, tablets and laptops. This appears to be successful in driving rapid LTE adoption187. If successful, some consumers may even consider dropping their fixed broadband subscription188. As the LTE base grows, carriers need to have a plan for pre‑pay. In many markets pre‑pay dominates in terms of subscriber numbers, so offering LTE handsets at prices applicable to the market likely to be a significant driver of adoption makes sense. In pre‑pay markets such as India and Russia, where LTE is currently available, sub‑$100 LTE handsets could encourage faster adoption. When LTE services become available in China – the world’s largest smartphone market– sub‑$100 handsets could be a critical factor in uptake189. In terms of marketing, a key question is how best to differentiate 3G and 4G. Operators need to strike a balance between underwhelming and over‑selling, as there may not be any single new killer app in 4G which 3G cannot deliver. What will differ markedly, however, is user experience, and as a result duration and intensity of usage. Content companies are likely to be excited about the possibilities for distributing via faster LTE networks. However they should be realistic as to what is possible. LTE will be faster than 3G, but network access may be too expensive for bandwidth hungry applications, and bandwidth is finite. Sending video over LTE is technically possible but may not be the best use of LTE, particularly when alternatives such as Wi‑Fi are available.38

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Smartphones ship a billion butusage becomes simplerIn 2013, Deloitte predicts that global shipments of One significant example of the diversity in usage ofsmartphones, defined as any device perceived by smartphones relates to data. In 2013, one in every fiveconsumers as being a smartphone, will likely exceed one smartphone owners may never or rarely (less than oncebillion units for the first time190. The installed base of all a week) connect to the Internet through cellular orsmartphones, per this definition, is likely to be close to Wi‑Fi in 2013. Throughout the year, there are likely totwo billion devices by year‑end191. be hundreds of millions of smartphone owners who are not on a data package. Deloitte’s research in multipleAs the base grows, usage is likely to stratify further192. countries indicated that among those owning or withThe absolute number of those exploiting the full breadth access to a smartphone more than one in five did notof a smartphone’s capability is likely to increase, but the use their device to connect to the Internet (see Figureproportion and absolute number of those using only 2 and 3)193. The 400 million smartphones that never orthe basic functionality of a smartphone – voice, text and rarely connect to the Internet in 2013 will not be idle,photos – is also likely to rise. but their usage will resemble that of a feature phone.Figure 2. Proportion of smartphones that are Internet‑connected in developed markets among respondents who own asmartphone100% 92% 85% 80% 79% 77% 77% 72% 72% 64% 60% 40% 20% 0% Japan US UK France Finland Germany Canada BelgiumNote: The sample for developed markets is nationally representative.Source: Deloitte Global Mobile Consumer Survey, May‑June 2012194. Sample: Respondents who own a smartphone (Belgium 249,Canada 933, Finland 405, France 791, Germany 846, Japan 598, UK 1063, US 836)Figure 3. Proportion of smartphones that are Internet‑connected in developing markets among urban professionals who owna smartphone100% 91% 85% 81% 80% 77% 76% 76% 67% 60% 40% 20% 0% Turkey Croatia South Africa Brazil Argentina Mexico RussiaNote: The sample for emerging markets is representative of the online population.Source: Deloitte Global Mobile Consumer Survey, May‑June 2012195. Sample: Respondents who own a smartphone (Argentina: 474,Brazil: 779, Croatia: 445, Mexico: 659, Russia: 591, South Africa: 1588, Turkey: 410) Technology, Media & Telecommunications Predictions 2013 39

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The reasons for using these phones in such a basic Owners of entry‑level or older smartphones may way are multiple and often overlapping: the limited download and try out apps, or browse some sites capability of new entry‑level smartphones and older soon after acquiring their devices, but if the experience hand‑me‑down high‑end smartphones; the lack of is poor, they may never try it again199. According to interest or ability among a proportion of smartphone Deloitte’s research conducted in 15 countries, owners to use their device’s smart capabilities; the 16 percent of smartphone owners have never lack of understanding or affordability of data tariffs, downloaded a single app. In the developed markets including understanding of metered charging; the surveyed, 21 percent of smartphone owners and lack of the required cellular and/or Wi‑Fi infrastructure 13 percent of urban professional smartphone owners that would enable a user to exploit the full set of a in emerging markets have never downloaded an app200. phone’s smart functionality and multiple ownership of It may be that the only apps this category of owners smartphones by individuals. will ever use are those that come pre‑loaded onto the device. There is a significant variance in the technical capability in the smartphone base. While the capability of all A second reason for basic usage is simply because the smartphones at all price points is constantly rising, phones’ owner is uninterested in using a smartphone for there is a massive difference in the specification of anything more than making calls and sending messages smartphones. A low‑end smartphone can wholesale – even if the phone is capable of it201. for as little as $50, particularly for soon‑to‑be‑replaced models196. A high‑end smartphone can retail for In a growing number of markets it is becoming ever over $700 before tax. As Deloitte highlighted in the harder to purchase feature phones, meaning that 2012 Predictions for the Telecommunications sector, as someone wanting to replace their feature phone may of the start of 2013, we estimate that half a billion of struggle to find an equivalent model to replace it the global smartphone base will have retailed (prior to with, and may settle for a smartphone through lack subsidy) for $100 or less197. of alternatives202. That person may be reluctant or simply disinterested in using a smartphone’s breadth Further, in 2013, the installed base of hand‑me‑down of functionality. The growing inability to find a feature smartphones is likely to continue to rise. Smartphones to purchase is likely to lead to a growing gulf between that are over two years old may struggle to deliver the smartphone and 3G/4G penetration across all markets. applications that a high‑end smartphone, costing up to For example, in Vietnam as of Q1 2012 smartphone $1,000 after tax, can. penetration was around 30 percent but only 11 percent of subscribers had a 3G subscription203. Some games’ graphics may render flawlessly on a high‑end device, but appear pixelated and jerky on a The shrinking availability of feature phones is mostly due low‑end or relatively old smartphone. Some applications to the fact that manufacturers, especially those with may simply not open on a low‑end phone due to smaller scale, may not find it viable to develop their own insufficient processing power or memory, while some proprietary operating system (OS) and prefer to use the low‑powered devices may simply be poor at rendering available open source OSs. Some smaller manufacturers even mobile specific sites. Entry level devices may only may simply find it unviable to manufacture 2G feature have 2.5G networks which may prove annoying slow at phones and focus on entry level 3G smartphones downloading data. In some markets 3G networks are instead: a third party OS could be used, and margins not yet available198. may be higher.40

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Some users – for examples those that inherit A further reason for smartphones under‑utilizationsmartphones from others – may be grateful to receive is because the owner’s underlying cellular networkthe phone, but may not want to use the data services, may have poor mobile data quality and coverage.often for reasons of affordability. Teenagers receiving While cities have ever improving 3G and LTE coverage,these devices may not be able to afford the data costs. mobile broadband penetration in rural areas remainsSome of these donated smartphones may end up inconsistent. In emerging countries, fixed broadbandbeing used principally as portable games consoles or infrastructure may be patchy and public Wi‑Fias music players and occasionally connect to Wi‑Fi. hotspots scarce.Older recipients may find the data tariffs difficult tointerpret, or be put off by articles in the press about A final reason for low or no usage of a smartphone’sbill shock204. In some households, there may only be data capability is multiple ownership – a growingsufficient budget for one or two data plans, but not proportion of individuals own several smartphones.for the entire family to be on a data plan. So while the Among 15 countries surveyed in a recent study,penetration of smartphones may rise in a household, between eight to 52 percent of respondents own orthe number of data plans may stay constant. To provide have access to a smartphone206. Some owners that arecontext, in the US, average household spend on cell provided a smartphone by their employer prefer to buyphones was $1,226 in 2011 versus $1,110 in 2007205. a personal device too. In some cases this is to separateIn that time, household spend for all items increased work and private lives; in other cases it is because anby $67: in other words, families reduced spend in individual wants to use different models of phone forother areas to accommodate rising spend on mobile different functions, e.g. a qwerty keyboard phone fortelephony. The ability to afford a greater number of data e‑mail, and a touch screen for browsing. In these casesplans per household may be limited. one smartphone may be used predominantly for data, but the other little used.In a few cases individuals may spend hundreds of dollarson a new high‑end smartphone and just use it to makecalls and send messages. This is similar to the way inwhich luxury kitchens may typically only be used tomake toast or a sports car with a racing heritage may In a few cases individuals may spendbe used predominantly for the school run. Owners of hundreds of dollars on a new high‑endhigh‑end smartphones – as with owners of any high‑endproduct – may purchase these devices because of their smartphone and just use it to make callsbuild quality, or because of the cachet that comes withownership, rather than because they necessarily want to and send messages.exploit the range of their functionality. Technology, Media & Telecommunications Predictions 2013 41

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Bottom line Smartphones have been a phenomenal success and are likely to remain so in 2013. However while smartphones’ shipments and installed base should continue to grow, they are likely to be used in different ways by different users. Smartphone owners should not be considered homogenous. Even across the same model, usage is likely to vary considerably. A key recommendation for operators is to encourage those currently refusing or reluctant to use data services to try them out. In some cases it may mean sponsoring the creation of content designed for lower‑end phones that would provide an incentive to try out data. For others it may mean the creation of tariff schemes that are easier for the mobile data ‘refuseniks’ to understand – for example the offer of an all‑you‑can‑eat per application tariff (For more information, see 2013 Prediction: All‑you‑can‑app) For those that have inherited smartphones and do not take as intuitively to mobile data usage as the phone’s first owner, in‑store walk‑throughs of how to browse or how to download apps may be useful. Mobile operators should also note that failure to convince someone to use a smartphone’s data capability isn’t necessarily a failure. In one respect low data usage can be a good thing: metered voice usage remains a relatively high margin business in most markets, and they are much more likely to receive text messages through higher margin SMS tariffs than lower margin data messaging apps. Understanding the diversity of smartphones and smartphone owners is critical to any company attempting a “mobile centric” strategy. This strategy needs to respect the diversity of the smartphone user base and also acknowledge the reluctance or financial inability of a large number of smartphone owners to use a smartphone for data207. App developers should determine where they should best focus their development resources. Developing for all platforms and phones is unlikely to be feasible. Developers should note that owners of entry‑level and older smartphones are unlikely to have significant personal budgets set aside for purchasing apps. This may cause a negative spiral: as owners of older phones have a declining range of apps compatible with their generation of smartphone, their appetite for accessing app stores will diminish. Retailers and content companies should determine how their addressable market may vary by phone model or operating system208. Just because someone owns a smartphone does not necessarily mean that they will often or ever access a mobile website. Further, someone willing to purchase an app, such as a game, may not want do their weekly shop via their smartphone209. Similarly they should be careful to separate tablet users from smartphone users: while tablets and smartphones share an operating system, usage of a ten inch tablet may vary significantly from that of a four inch smartphone. Smartphone vendors should determine how best to differentiate their products with target clients who are unlikely to use data services. One approach would be to preload a range of apps, such as games that can be played offline. For apps that require Internet connectivity, it may be that in order to gain app usage outside existing customer bases, content companies or businesses need to subsidize Wi‑Fi or cellular connectivity costs210. Also carriers should continue to build out data ready networks in the developing world: there may be hundreds of millions of data capable smartphones just looking for a signal – at the right tariff.42

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“Mobile” advertising is dead. Long livetablet and smartphone advertisingDeloitte predicts that in 2013, what is currently Mobile advertising has traditionally grouped tabletsdescribed as “mobile” advertising will get split into and smartphones together because of their manytwo categories representing two similar but distinct similarities. Both devices share operating systems (OS).devices – tablets and smartphones211. The smartphone The processors, graphics, radios, Wi‑Fi chips, camerassector may generate about $4.9 billion in revenues in and satellite navigation chipsets used in smartphones2013, while advertising on tablets may be worth about are often the same as in tablets. Flash memory sizes$3.4 billion212a. are similar. The screen technology used on full‑screen smartphones and tablets is virtually identical. Even priceIn 2013, ad revenue is likely to reach $2.50 per ranges are broadly similar221. Feature phones’ adsmartphone, and $12.60 per tablet212b. The differences by revenues are often bundled with smartphones’ astype of advertising reveal a wider gulf. Display revenues, they also have some similarities, such as their usage ofwhich include in‑app ads213, are forecast at about $7 per text‑message based ads.tablet, considerably higher than a forecast $0.60 persmartphone. Differences between search revenue per Yet in one critical respect, the devices differ: screendevice are less marked but still significant – at about size. This drives fundamental differences in usage$1.70 per smartphone and about $5.60 per tablet214. and monetization. Smartphones are five to seven square inches, and have little space in which to placeIn 2014, growth in both categories should be strong, high‑impact display ads. The largest smartphones arewith smartphone advertising rising by between 30 to 11 square inches, about a quarter of the space offered35 percent to about $6.5 billion, and tablet advertising by 9.7 inch tablets, which boast a 40 square inch displayby 50 to 55 percent for tablets to about $5.2 billion. area. Even seven inch tablet computers have almostRevenues will be generated from a forecast base of twice as much viewable area, at 21 square inches, thansome 2.3 billion smartphones in 2014 (approximately a the biggest smartphones.20 percent increase from 2013) and 370 million tablets,a 40 percent rise from 2013215. Advertising revenues per The usability of a screen ratchets up with size. Ten inchsmartphone in 2014 are forecast at about $2.80 and tablet screens have four to eight times more surfaceabout $13.90 per tablet216. area than smartphones, but usability, usage and advertising effectiveness may be multiples of that.Advertising effectiveness is measured by a range of Smartphones and tablets both use virtual keyboards.metrics standard across most advertising formats, such On the former the keys are small, but use cleveras cost per thousand impressions (CPM) and, for online algorithms to guess what the user is trying to input.advertising, click through rates (CTRs). All these metrics On a ten inch tablet, the keys are likely to be similarshould remain higher for tablets than for smartphones to those on a laptop computer, i.e. close to the sizein 2013, and in some cases in the medium term. As of of a typical fingertip. Error rates are likely to be lower.Q2 2012, CPMs for tablet computers averaged $3.95; ‘Fat fingers’ – that is clicking on the wrong link whenfor smartphones they were up to $2.85217. One analysis browsing or selecting the wrong letter or number whenfound that tablet CPMs are 33 percent to 55 percent typing, are not about the user’s fingers being over‑sizedhigher than for phones218. Among smartphones, there but rather due to tiny screens increasing the incidenceare significant variations in usage by operating system of imprecise typing222. The higher the error rate whenand price bracket, with CPMs as of Q2 2012 ranging typing a search query or clicking on a hyperlink, thebetween $0.20 and $2.85219. One agency found that lower the likelihood the user will return.conversion rates were more than four times higher ontablets than on smartphones220. Technology, Media & Telecommunications Predictions 2013 43

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It is important to note another critical trend among A degree of tablet usage is likely to be a straight smartphones, which is stratification in usage. transfer from a PC: owners of larger tablets are likely to As mentioned, 1.9 billion smartphones are forecast to migrate, or to have migrated, a significant share of their be in use by the end of 2013. But these devices will be browsing (including search), e‑commerce, video games used in increasingly different ways. For example, about and communications activity to tablets. Again, browsing 400 million devices will never, or rarely (less than once and communications support ad serving and a week), be used to connect to the Internet. In other stimulate search. words, almost a quarter of smartphone users will rarely or never browse the Internet (and therefore will not be Tablet adoption is still in its relative infancy – globally exposed to advertising on websites) or effect a search by the end of 2013 there will be less than 300 million from their phones. tablets in use and in most markets tablet penetration will be lower than 30 percent224. In fact, in the majority of In the medium term, the number of smartphones users markets ownership percentages will likely still be in the who rarely or never connect to the Internet – because single figures. That means the tablet’s full advertising all they want to do is to make calls and send messages potential is some way from being realized. – may grow, driven for example by a lack of standard feature phones to purchase. The growing base of The use of search on smartphones and tablets when the smartphone owners who use their devices as feature user is out and about is likely to be affected by network phones may drag down ad revenues per device in the availability. Search relies on bandwidth – either from medium term. Messaging‑ based advertising would cellular mobile or Wi‑Fi. With inadequate bandwidth, it remain the only form of advertising on these devices. may be challenging for users to both run a search and then click on the results, impacting negatively on click An individual’s pattern of smartphone usage is likely to through rates. Rising availability of Wi‑Fi, as well as more be influenced by ownership of other devices, particularly extensive and faster 3G/LTE networks, should make the tablets (and especially smaller, more portable tablets). ability to complete a search cycle more likely and search Individuals who own both a tablet and a smartphone should become more valuable as a result. are likely to tend to use tablets for any activity that works better on a larger screen, including browsing, Use of search when out and about – regardless of e‑commerce, video games, gaming and some social network connectivity – will be driven by need. The need network usage223. All these activities offer opportunities to search (for a place to eat, a shop or a hotel) is for for serving ads or encouraging search. the majority likely to be occasional rather than habitual. And when a search is required, there are multiple alternative options available, from polling friends and family, to speaking with a shop assistant or simplySmartphones and tablets are powerful stumbling across a hidden treasure.advertising media, each with its strengths Smartphones and tablets can use location to increase advertising effectiveness. This could enable targetedand constraints. While similar, they are advertising, perhaps blended with coupons. In marketsdistinct, and their distinctiveness may with a broad base of smartphones enabled for near field communications (NFC) and NFC readers, smartphonesdeepen over time. could be used to find and then pay. However, while the NFC phone base is likely to be in the hundreds of millions in 2013, the availability of NFC readers may remain variable. Smartphones and tablets are powerful advertising media, each with its strengths and constraints. While similar, they are distinct, and their distinctiveness may deepen over time.44

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Bottom lineUsage of smartphones and tablets is sufficiently distinct to merit them being regarded as separate categories in multiple respects,including advertising. Splitting the device categories should make it easier for the industry to realize value from the advertisingopportunities offered by billions of smartphones and tablets. The increasing variety of smartphones may also merit furtherdelineation, for example by screen size, operating system or device age225.Both forms of advertising are in relative infancy. In 2013 the modern tablet form factor will be a mere three years old and modernsmartphones just a few years older. There is much experimentation and innovation ahead. For example, one area of opportunity issecond screening, which is the use, while watching television, of a second (and in some cases third) connected screen‑based device,such as a tablet, smartphone or laptop. Advertising shown on the television set could be replicated on the second screen, or thecontent of the TV program being watched could trigger certain websites to open on the second screen. Another opportunity lies withgames. There are an estimated 200 million online gamers globally, who play for an average 13 hours per week226. The coming year islikely to see much continued experimentation with these opportunities.The progression of smartphone and tablet advertising is likely to be linked to their ability to generate e‑commerce revenues.While both devices are in their relative infancy, there is a significant gap in the range of content accessible via each. Most internetcontent is formatted for viewing on PCs. This reflects the PC’s 80 percent share of browsing time across PCs, tablets and smartphones.Content formatted for PCs – including e‑commerce sites – is generally also viewable on larger tablets. Smartphone advertisingrevenues are likely to be a function of the quantity of smartphone optimized e‑commerce sites are created. Website owners need todetermine how best to allocate development resources for PC‑oriented and smartphone‑optimized sites227.Companies should also consider how smartphone and tablet advertising is likely to connect to other forms of advertising, andalternative forms of interaction. It may be that the smartphone drives discovery, the tablet offers further information and the PC orshop is where the transaction takes place228.Advertisers should consider new forms of advertising specific to the physical characteristics and typical usage of smartphones. If thebanner advertising used on PCs and tablets cannot readily fit a smartphone screen, then new formats should be tried which aim toharness its positive aspects (such as location information) and which work within its limitations. For example, rich media advertisingsuch as interactive videos or game functionality might be more appropriate for small screens.Any form of advertising may be subject to fraudulent activity. The smartphone and tablet ad categories are unlikely to be immune.The industry should consider how best to minimize fraudulent clicks229 and exaggerated claims230.Some users may be worried about fraudulent ads on smartphones and tablets which lead to malware being downloaded231.The industry should consider how best to indicate to users that ads are authentic. Technology, Media & Telecommunications Predictions 2013 45

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All‑you‑can‑app Deloitte predicts that in 2013 between 50 and A fundamental challenge of metered billing is that it 100 mobile operators will offer all‑you‑can‑eat requires subscribers to know the file sizes of digital services with unlimited access to specific applications. content they want to download. However, the size of a All‑you‑can‑app (AYCA) will, for a fixed monthly digital file is not always obvious. Consumers are familiar subscription, offer unrestricted use of each service’s with CDs and DVDs: they look the same, are of similar content, with connectivity charges bundled in. Over the size and a CD album plays about half the time of a DVD course of the year the portfolio of AYCA services movie. However consumers may not realize there is a available should grow. Pricing is likely to range from zero thousand‑fold difference in the size of a compressed to tens of dollars per month, with the price indicative of MP3 track, which is typically a few megabytes (MBs) and the content’s value and data volumes. AYCA services will an hour of high‑definition video, which can be many complement existing data tariffs. gigabytes (GBs)234. In 2013 AYCA services will be aimed primarily at Operators are likely to be eager to introduce AYCA customers interested in, but hesitant about, mobile tariffs to encourage more of their subscriber base to data usage, due to worries about running up large data use mobile data services. Data revenues are needed charges. These will mostly be the hundreds of millions to counterbalance declines in mobile voice, SMS and of users currently migrating or recently migrated to roaming revenues. But a large proportion of smartphone smartphones. Further, AYCA may be popular in countries owners do not appear to use data services. By year‑end with low income levels, where they will aim to stimulate 2013 about 400 million of the 1.9 billion smartphone usage of mobile data services. installed base may never or only rarely (less than once a week) be used to connect to the Internet. In 2013, AYCA is a middle ground between unrestricted and over the medium term, a large proportion of the all‑you‑can‑eat tariffs and metered data charging. four billion mobile users still using feature phones may All‑you‑can‑eat is attractive to consumers but upgrade to a smartphone235. This large group needs a unpredictable, and occasionally rampant usage has mobile data pricing model appropriate to later adopters. made the offer uneconomic for some operators232. This needs to be perceived as low risk. Metered usage enables carriers to charge according to network impact, but inadvertent usage can land AYCA may fit the bill. Among 15 countries surveyed in subscribers with unexpectedly high data bills233. a Deloitte study, between 29 percent and 54 percent of smartphone owners would like to have unlimited access to services they use most (see Figure 4)236.Figure 4. Smartphone owners that would prefer to subscribe to a package which would give them unlimited access to services they use most, by country60% 54% 52%50% 48% 48% 47% 39%40% 37% 35% 34% 34% 33% 32% 32% 32%30% 29%20%10% 0% Japan Finland Mexico South Germany Brazil France Belgium Argentina Croatia Turkey Russia US Canada UK AfricaSource: Deloitte Global Mobile Consumer Survey, May‑June 2012237. Sample: Respondents who own a smartphone and use the mobile network to connect to theInternet (all countries, 5,398 respondents)46

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The same study also found that between 26 and 60 percent of users had a higher‑than‑expected bill in the past12 months (see Figure 5). Over half wanted to cap their monthly mobile spend and would be prepared to set a limitin excess of their current average spend238.Figure 5. Respondents who have had a higher‑than‑expected bill in the past 12 months70% 60%60% 57% 56%50% 48% 47% 47% 45% 44% 44%40% 38% 36% 35% 31% 30%30% 26%20%10% 0% Mexico Turkey Brazil Belgium France Croatia South Argentina Canada UK Finland Japan Germany Russia US AfricaSource: Deloitte Global Mobile Consumer Survey, May‑June 2012239. Sample: Respondents who have a mobile phone contract (all countries, 11,090 respondents)There are proven parallels to the AYCA model. The pay Operators are likely to partner with existing third partyTV sector has for decades offered unlimited access companies to jointly offer AYCA services, as well asto specific services or genres, such as sports, movies, create their own. For example in India, Reliance offersmusic or kids content. Customers can readily increase or unlimited access to WhatsApp and Facebook forreduce their content bundles – and the monthly spend Rs16 ($0.30) per month241. Some operators offeris predictable. unlimited access to apps when roaming. Hong Kong firm 3 offers unlimited access to WhatsApp for aroundDeloitte’s research indicates that the most popular AYCA $6 per month while roaming242. Telkomsel Indonesiaservices would likely be for social networks, email, video offers optimized access to third party voice over Internetand Instant Messaging (IM) services. Facebook was Protocol (VoIP) services243.ranked the number one most desired service in 12 ofthe 14 countries surveyed – with Russia and Japan the Operators are also likely to offer AYCA music and TVonly exceptions240. YouTube was second most popular, services, which are more data intensive. In Thailand,being ranked number one in Japan and number two Malaysia and Singapore, online music service Deezerin five countries. WhatsApp (an instant messaging Premium + is available for a fixed fee with connectivityservice) and BlackBerry Messenger were also among charges included244. In Germany, Deutsche Telekomthe most popular services. The range of AYCA services has teamed up with Spotify to offer a €10 ($12.88)offered is likely to steadily become more diverse over service that bundles unlimited access to music with2013 and beyond. inclusive access charges245. As for TV, Vodafone in Spain and Greece is offering unlimited access to a range of TV channels for €1.77 ($2.28) and €2.46 ($3.20) respectively per week246. Technology, Media & Telecommunications Predictions 2013 47

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Some operators and operator groups may offer AYCA services for free for a limited period to stimulate Bottom line usage. In Q4 2012, Telefónica offered free usage Confusion over data pricing benefits none of and subscription to Joyn, a messaging application247. operators, consumers or content creators. Some AYCA services may be offered for free to While initial data users may have had a reasonable encourage usage of an indirectly monetized service. understanding of file sizes, mainstream users are For example, Google has launched a service in more likely to get bill shock through inadvertent partnership with Globe Telecom, in the Philippines, downloads of large files via cellular networks. offering free access to Google products such as search, Gmail and Google+248. Users are able to access It is a good time to introduce AYCA: the websites that show up in Google’s search results for majority of mobile customers have yet to move free. Accessing a site outside those results prompts an to smartphones, and predictability in pricing invitation to subscribe to a mobile data plan. should provide sufficient reassurance to try out mobile data services. Further, the technological tools needed to deploy AYCA are increasingly economically viable – for example the cost of deep packet inspection (DPI) technology falls every year, due to Moore’s Law249. AYCA will not suit every customer or every carrier. Heavy users may prefer unrestricted all‑you‑can‑eat packages, where available, and figure out for themselves which services to use each month. Business users may prefer metered packages. Carriers should offer the range of data tariffs most suited to their customer bases. In a few markets, AYCA may not be the right approach: rather offering differing tiers of unlimited usage but at different access speeds may be considered the best approach. AYCA need not be limited to offers from carriers. Content companies and aggregators could offer products and services with bundled mobile connectivity charges250. Consumers would not have to pay twice: once for the content and again for data used in the download. Carriers should also note that other connectivity providers are likely to offer AYCA‑type services. For example, Google has entered into a partnership with a Wi‑Fi provider in India which offers users unlimited access to Google+ and 10 minutes of free access to YouTube each week251. Some handset vendors may want to proactively partner with content owners and pre‑agree potential AYCA deals. This could make the vendors’ handsets more attractive to operators when determining which handsets to support.48

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The looming spectrum shortage:worse before it gets betterDeloitte predicts that although additional spectrum Today, the average smartphone drives 35 times morewill continue to be made available in 2013 in many traffic than a typical cellphone. It is expected that byglobal markets, spectrum exhaustion will continue to 2016 wireless traffic will have increased 50 fold fromexacerbate in many countries, especially in dense urban 2012.areas. End users will continue to see performanceimpacts as a result, primarily in the form of lower So why can governments not just increase the “supply”speeds, but also through inability to access networks of spectrum? The supply of radio spectrum can beand dropped calls or sessions. The reason is simple improved by only two methods.demand for spectrum will exceed supply. Demand forwireless bandwidth continues to grow in leaps and The first is accomplished through the allocation orbounds, but supply is relatively constrained. By 2014 the reallocation of frequency bands to operators. As theUS alone may suffer a 275 MHz spectral “deficit”252. distribution of spectrum can have major economic implications for competition and accessibility, manyTo be clear, a spectrum shortage is highly analogous governments put significant effort into developing andto a crowded highway: it doesn’t just “stop working” governing the models used for assigning spectrum.like an electrical grid that goes down in a storm with For the last decade, the auction approach has becomeno power to anyone across wide areas, sometimes most prevalent, both as a source of government revenuelasting for days. Instead, the likely outcome of the and a relatively transparent method of allocating scarcepredicted shortage will be most intense in cities, on and valuable resources. However, these auctions oftencertain networks (those with the most subscribers) and incorporate additional rules to encourage new entrants,in peak wireless hours. Users can expect wireless ‘rush provide coverage of rural and lower income areas,hours’ to be characterized by two to three times as provide support to aging public safety communicationmany failed attempts to connect, three to four times as networks, and mandate that a certain percentage of themany dropped calls or frozen web browsing, and both population be covered. While auctions allow additional3G and 4G speeds 50‑90 percent lower than expected. capacity to be made available, such as the repurposingIn the worst situations, download speeds may be under of analogue TV bands occurring in many countries,1Mbit/s for lengthy periods of time, making video they do not occur rapidly, and are lagging behindstreaming impossible and even web browsing difficult. surging demand.The cellular device market sends and receives in the The second method is to make more efficient use ofportion of the electromagnetic spectrum ranging limited spectrum. Fourth generation (4G) technologiesfrom 600 MHz to 3600 MHz. These bands are strictly such as LTE have substantially improved spectralregulated by national governments and allocated for efficiency. LTE is almost 16 times better than 3Gspecific purposes. Spectrum is like land: no more can be at moving a bit of data over a Hertz of spectrum.made, it is difficult to share and not all spectrum bands However in the seven years it has taken to developare created equal. 900 MHz is the spectral equivalent and widely deploy this new technology, wireless trafficof beachfront property: transmissions on that frequency increased 30‑fold. Telecommunication equipmentband go further, penetrate buildings better and have vendors simply can’t invent new technologies fastgood capacity. On the other hand, 3500 MHz is a bit enough to meet growing demand. The emerginglike desert scrubland: radio waves in this band have LTE‑Advance standard expects to further double254shorter range, poor in building performance, and are spectral efficiency over LTE. This is wonderful, but resultseven vulnerable to bad weather. in adding less than a year of additional capacity at current growth rates.The demand for additional spectrum is tied directlyto the seemingly insatiable consumption of wirelessbroadband communications. Wireless traffic has morethan doubled each year since 2009 and the increasingpenetration of smartphones and tablets only serves toexacerbate the problem253. Technology, Media & Telecommunications Predictions 2013 49

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Emerging technologies, such as Heterogeneous Networks or HetNets, have the potential to address some of these concerns. HetNets consist of a series of wireless access layers, protocols, and equipment allowing mobile devices to seamlessly move between wireless networks of various types. Voice calls and data sessions can be maintained without interruption as devices move between macrocells (covering dozens of km), microcells (covering kms), picocells (100s of meters) and femtocells (tens of meters) and back. Emerging technologies and standards can extend HetNets across Wi‑Fi, Mesh and Ad‑Hoc wireless networks as well. As little as two years ago, this lack of portability was not a significant issue for most end users. Mobile devices connected to the cellular network were typically used in such a way that virtually all traffic was managed by a traditional macrocell, usually located on a tower. The problem is that moving between these networks is sometimes not transparent to either the end user or the network provider. Users may need to: manually identify and select a different network (either microcell or Wi‑Fi); provide necessary credentials to authenticate onto the new network; and re‑establish a session with the application. HetNet is based around more intelligent devices and networks that can monitor the current wireless environment for available networks and single quality and, when appropriate, automatically select, authenticate and hand over current sessions without user intervention. At this time, some of the technologies needed to deliver HetNet services have yet to be widely deployed. Further, HetNets require changes to the end user device, access points and the network core making adoption more complex and expensive. Internet Protocol Version 6 (IPv6) is the successor to the widely used IPv4, which has “only” 4.2 billion unique addresses. Almost all of those are in use, requiring addresses to be re‑used. While that helps mitigate the shortage of addresses under IPv4, it means that new addresses must often be dynamically assigned, making it difficult to maintain existing session information and to determine exactly where devices are located. IPv6 has 1038 addresses (or enough to give every star in the known universe a trillion IP addresses) and will be able to give each device a unique identifier, and simplify the handover processes. VoLTE (Voice over LTE) is another set of technologies and standards that will enable HetNet by allowing voice traffic to be carried over 4G networks. Today, most 4G networks use LTE for data and fall back to 2G and 3G networks for voice. This increases the complexity of moving calls between networks as there may be multiple voice and data sessions than need to be managed using very different methods and technologies. VoLTE handles voice calls as another data session (containing audio information) allowing much easier movement between networks. The standards behind HetNet have been under development for several years (the IEEE 802.21 working group was established in 2004). However, since HetNets span networks defined by multiple standards bodies (including IEEE, 3GPP, 3GPP2, ITU‑T and IETF) a number divergent attempts at standardizing network interoperability have occurred delaying widespread adoption. Although current initiatives have begun to show progress (such as 802.11u) there is still much activity. The Wi‑Fi Alliance’s Hotspot 2.0 program255 began administering the Passpoint™ certification process in June 2012, which covers mobile devices and hotspots that automatically select and authenticate access to Wi‑Fi networks using a devices SIM card. At present, only a limited number of certified devices are available. In parallel, the Wireless Broadband Alliance, as part of its own Next Generation Hotspot initiative256, is working closely with the Wi‑Fi Alliance to validate certified devices in real world conditions. Phase two trials with several global carriers began in Q4 of 2012257. It is expected that many carriers are waiting on the outcome of these trials before making significant investments in HetNet related infrastructure. While strong progress is being made towards making HetNet services a reality, it may take most of 2013 to resolve these challenges. Foundational technologies will continue to be rolled out, standards compliant equipment will become widely available and business concerns will be ironed out. Some markets will see the introduction of limited HetNet capabilities and limited pilots. Additional acquisitions in the Wi‑Fi service provider and equipment market are likely as lagging carriers and manufacturers look to quickly build their footprint or expand their product offerings.50

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There is another approach, called cognitive radio, where This allows much more data to be sent over a giventhe device detects all parts of the wireless spectrum and spectrum band at a given point in time258. Also knowndynamically alters its transmission or reception parameters as dynamic spectrum management, it does work in labsaccording to which bits are currently not being used. today. But it is likely years to decades away from adoption. Bottom line While progress is being made towards making additional spectrum available, and considerable effort is being made to improve spectral efficiency, demand for wireless bandwidth will likely attempt to outstrip these improvements in supply for at least several years. Major metropolitan areas in some geographies should expect to see continued deterioration in end user experience. The other alternative is that carriers may want to increase what they charge for data and speeds: if spectrum truly is a scarce resource, then using price to signal its value is likely to reduce demand to the point where service standards do not fall. Regulators may wish to accelerate and streamline their spectrum allocation process. Although auctions are an equitable and transparent process that also raises money for the treasury, the process around them can take years or even decades. Further, they can look at allocating larger spectrum blocks (the blocks have tended to be somewhat fragmented) and encouraging solutions that promote spectrum sharing, particularly at the higher frequency bands. Carriers will likely want to do even more with Wi‑Fi, as well as find picocell and femtocell business models that lead to more rapid adoption. One possible strategy is that instead of having consumers pay for the small cells (which they have been loath to do) carriers can respond to complaints of poor coverage by paying for the femtocells themselves, and thinking of it as a customer retention tool and associated cost. Any coverage of adjacent areas and cellular offload is just gravy. Spectrum isn’t just needed for smartphones and tablets: as 4K TV rolls out, TV broadcasters may want to get back some of the spectrum that they gave away in the transition from analogue. Although compression is likely to improve the amount of bandwidth that 4K broadcast signals will require, it is unlikely to provide a true 4K signal in the current spectrum allocated for HD digital. Ironically, in the short term, some customers may experience improved voice performance as delays in implementing VoLTE (Voice over LTE) will allow data traffic to migrate to 4G networks, while freeing up 3G networks to more effectively carry voice traffic. There are some cities where macro‑cell sizes are as small as they can usefully be: rooftop antennas and towers cannot be spaced any more closely. But that is not the case in all areas – sometimes the local resistance to new antennas is such that it can take years to erect a new tower259. Streamlining the cell site approval process – while continuing to allow for citizen input, of course – would help reduce some of the impact of spectrum scarcity. Finally, along with cognitive radio, smart antenna technology with variable gain can correct for certain inefficiencies by directing signals toward devices generating or consuming traffic. In effect this shrinks the cell site by only occupying the spectrum in the direct line of sight between the tower and device. As other devices consume traffic, they can share that same spectrum by also taking advantage of the directionally focused antenna260. Technology, Media & Telecommunications Predictions 2013 51

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Endnotes1 Those who have tablets are likely to have lower PC use, of course. But even in developed markets, tablet penetration is less than 25 percent. Source: Pew Internet: Mobile, The Pew Research Center, 4 December 2012. See: http://pewinternet.org/Commentary/2012/February/Pew-Internet-Mobile.aspx2 The definition of a smartphone for this prediction is based on consumer perceptions of what a smartphone is, rather than the standard industry definition, which pivots on the type of operating system (OS) used. Many consumers, particularly middle majority adopters, are likely to consider phones as smart if they have touch screens or full keyboards and they can use apps and not based on what intangible OS is under the hood.3a Deloitte Touche Tohmatsu Limited analysis which includes sales estimates for tablets and smartphones (based on our broader definition of smartphones). The estimates are based on existing knowledge, industry conversations and published industry estimates and forecasts such as: Nearly 1 Billion Smart Connected Devices Shipped in 2011 with Shipments Expected to Double by 2016, According to IDC, IDC, 28 March 2012. See: http://www.idc.com/getdoc. jsp?containerId=prUS23398412; Source: IDC Raises Its Worldwide Tablet Forecast on Continued Strong Demand and Forthcoming New Product Launches, IDC, 28 September 2012. See: https://www.idc.com/getdoc.jsp?containerId=prUS23696912; Source: Gartner Says Worldwide Media Tablets Sales to Reach 119 Million Units in 2012, Gartner, 10 April 2012. See: http://www.gartner.com/it/page.jsp?id=19801153b Deloitte Touche Tohmatsu Limited estimates based on existing knowledge, conversations with industry players and published industry estimates and forecasts.4 Source: Forecast: PC Installed Base, Worldwide, 2006-2015, March 2011 Update, Gartner, 24 March 2011. See: http://www.gartner.com/id=1602818 (requires subscription to read the full article) and Deloitte Touche Tohmatsu Limited estimate for 2013.5 The volume for the installed base of tablets and smartphones are estimates based on existing knowledge, conversations with industry players and published industry estimates and forecast including. Source: Forrester: 760M Tablets In Use By 2016, Apple ‘Clear Leader’, Frames Also Enter The Frame, TechCrunch, 24 April 2012. See: http://techcrunch.com/2012/04/24/forrester-760m-tablets-in-use-by-2016-apple-clear-leader-frames-also-enter-the-frame/6 Source: “Bigger is better”: Big-screen LED TVs prove to be a growth category, current, 8 June 2012. See: http://www.current.com.au/2012/06/08/article/Bigger- is-better-Big-screen-LED-TVs-prove-to-be-a-growth-category/QXUKTCGIIX.html7 Source: State of the Media: The Cross-Platform Report, Nielsen, March 2012. See: http://www.nielsen.com/content/dam/corporate/us/en/reports- downloads/2012-Reports/Nielsen-Cross-Platform-Report-Q2-2012-final.pdf8 Source: Poor auto-correction, predictive text and copy and paste functions mean tablets are not yet meeting user and corporate computing needs, Adaptxt, 12 July 2011. See: http://adaptxt.com/adaptxtlive/tablet-typing-must-leap-input-gap-replace-laptops9 Sometimes tablets came ahead of smartphones and sometimes behind. Source: Devices Used for Online Activities by Smartphone Owners in Canada, Pinterest, April 2012. See: http://pinterest.com/pin/25192079136536721/10 Comparing PC and mobile CPU power is about more than just the number of cores and clock speed. Nonetheless, the performance gap between mobile and computer processors has narrowed significantly in the past few years.11 Source: PCs Are Selling Just Fine, Thank You, PCWorld, 25 January 2012. See: http://www.pcworld.com/article/248770/pcs_are_selling_just_fine_thank_ you.html12 Source: PC Gaming Market Alive and Thriving as Related Hardware Business Tops $23 Billion, HotHardware, 3 May 2012. See: http://hothardware.com/News/ PC-Gaming-Market-Alive-and-Thriving-as-Related-Hardware-Business-Tops-23-Billion/13 Source: Do you obsessively check your smartphone?, CNN, 28 July 2011. See: http://www.cnn.com/2011/HEALTH/07/28/ep.smartphone.obsessed.cohen/ index.html14 Source: State of the Media: The Cross-Platform Report, Nielsen, March 2012. See: http://www.nielsen.com/content/dam/corporate/us/en/reports- downloads/2012-Reports/Nielsen-Cross-Platform-Report-Q2-2012-final.pdf15 Other represents the final 0.5 percent. The comScore methodology states that “Internet traffic is measured … as census level page view data collected from more than a million domains tagging with comScore.” Source: 2012 MOBILE FUTURE IN FOCUS, Page 9, comScore, February 2012. See: http://www.mchn.com/ sites/default/files/comScore%202012%20Mobile%20Future%20in%20Focus.pdf 16 Other represents the final 0.5 percent. The comScore methodology states that “Internet traffic is measured…as census level page view data collected from more than a million domains tagging with comScore.” Source: 2012 MOBILE FUTURE IN FOCUS, Page 9, comScore, February 2012. See: http://www.mchn.com/sites/ default/files/comScore%202012%20Mobile%20Future%20in%20Focus.pdf 17 Source: THE FUTURE OF DIGITAL, Business Insider, 27 November 2012. See: http://www.businessinsider.com/future-of-digital-slides-2012-11?op=1 18 Over 25 percent of American adults have access to all three form factors. Source: Half of U.S. adults own a smartphone or tablet, Pew survey says, Computerworld, 1 October 2012. See: http://www.computerworld.com/s/article/9231902/Half_of_U.S._adults_own_a_smartphone_or_tablet_Pew_survey_says19 In fact the relationship was linear across each age group: as respondents got older they preferred tablets more. Source: Devices, Consumption, and the Digital Landscape 2012, Deloitte Development LLC, February 2012. See: http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/us_tmt_ Executive_Summary_Devices_Study_052112.pdf20 Deloitte Touche Tohmatsu Limited estimate.21 “IT Procurement stands on its head”, Source: Technology Predictions, Deloitte Touche Tohmatsu Limited, 2010. See: www.deloitte.com/tmtpredictions2010 22 Almost all BYOC purchases seem to be for laptops. Desktops do not appear to be the usual choice under these programs, although they are usually not specifically excluded.23 Source: Bring Your Own Device: New Opportunities, New Challenges, Gartner, 16 August 2012. See: http://www.gartner.com/id=2125515 24 Source: Embracing the Consumerization of IT: A BYOD Case Study, ThinkHDI, June 2012. See: http://www.thinkhdi.com/~/media/HDICorp/Files/ SupportWorld/2012/MayJune12/SW_MayJune12_Genoway_BYOD.pdf25 Source: PC market decline casts doubt on future of corporate PC refresh cycle, ComputerWeekly, 24 May 2011. See: http://www.computerweekly.com/ news/1280095946/PC-market-decline-casts-doubt-on-future-of-corporate-PC-refresh-cycle26 UK research study of BYOC policies by Deloitte LLP. Study to be published in Q1 2013.27 Deloitte LLP (UK) tax findings, part of the same study. Study to be published in Q1 2013.28 Source: Computer and Internet Use in the United States, United States Census Bureau, 2010. See: http://www.census.gov/hhes/computer/publications/2010.html29 Source: A nation of temps, Salon Media Group, 23 August 2012. See: http://www.salon.com/2012/08/22/a_nation_of_temps/52

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30 Source: The Great Shrinking Office? More Companies Hire Remote Workers: Survey, CNBC, 14 June 2012. See: http://www.cnbc.com/id/47815587/The_Great_ Shrinking_Office_More_Companies_Hire_Remote_Workers_Survey31 Source: Total Cost of Ownership (TCO) of IT, Nash Networks, January 2009. See: http://www.nashnetworks.ca/total-cost-of-ownership-tco-of-it.htm32 Source: The move from BYOD to CYOD, Computer Business Review, 10 December 2012. See: http://www.cbronline.com/blogs/cbr-rolling-blog/guest-blog-the- move-from-byod-to-cyod-10121233 All standard keyboards have 47 symbol keys, or 94 with the shift button. Language doesn’t affect the number of keys, just which symbols those keys represent.34 94 raised to the eighth power: 6,095,689,385,410,816.35 Source: The Magical Number Seven, Plus or Minus Two Some Limits on Our Capacity for Processing Information. University of Toronto, 10 October 2001. See: http://www.psych.utoronto.ca/users/peterson/psy430s2001/Miller%20GA%20Magical%20Seven%20Psych%20Review%201955.pdf36 Users tend not to select symbols that are easily confused: commas/periods, semicolons/colons, the two dashes, forward slash/back slash, the three quotation marks and the three sets of parentheses. That leaves the most common symbols as: !@#$%&?37 Source: 10,000 Top Passwords, Xato, 20 June 2011. See: http://xato.net/passwords/more-top-worst-passwords/38 Source: Lazy password reuse opens Brits to crook’s presentation, The Register, 20 July 2012. See: http://www.theregister.co.uk/2012/07/20/password_reuse_ survey/39 Source: Passwords, Skull Security, 21 September 2011. See: http://www.skullsecurity.org/wiki/index.php/Passwords40 Source: New 25 GPU Monster Devours Passwords In Seconds, Security Ledger, 4 December 2012. See: http://securityledger.com/new-25-gpu-monster-devours- passwords-in-seconds/ The cost of the machine is a Deloitte Touche Tohmatsu Limited estimate.41 Source: Hackers crowdsource help to crack nearly 6.5 million leaked LinkedIn passwords, Computerworld, 6 June 2012. See: http://blogs.computerworld. com/20272/hackers_crowdsource_help_to_crack_nearly_6_5_million_leaked_linkedin_passwords42 Source: Smartphone Password Managers Not Secure, PC Magazine, 16 March 2012. See: http://securitywatch.pcmag.com/none/295400-elcomsoft-smartphone- password-managers-not-secure43 There are few published studies on this subject. Across about 30 test subjects, the Deloitte Touche Tohmatsu Limited TMT group set up a standardised test structure (same length password, same timing mechanism, same methodology, multiple attempts averaged). Everyone was fastest on the PC, but there were some whose touchscreen results were around nine seconds, while another group was much slower and took over 20 seconds using touch. This was purely an informal and unpublished attempt to provide some data on the difference between strong password entry on a full keyboard and a series of touch screens.44 Source: Safe Password Hashing, The PHP Group, 7 December 2012. See: http://php.net/manual/en/faq.passwords.php45 Source: RIM’s BlackBerry 10 To Block Certain Passwords, Information Week, 5 December 2012. See: http://www.informationweek.com/security/mobile/rims- blackberry-10-to-block-certain-pass/240143824 46 Source: Mum’s maiden name not strong enough for password backup, IT PRO, 9 March 2010. See: http://www.itpro.co.uk/621235/mums-maiden-name-not- strong-enough-for-password-backup47 Source: Password Reset Mechanisms: The Online Security Threat Nobody’s Talking About, Daniel Miessler, 25 August 2009. See: http://danielmiessler.com/blog/ password-reset-mechanisms-the-online-security-threat-nobodys-talking-about48 Source: Smartphone Password Keepers are Insecure, ElcomSoft, 2012. See: http://www.elcomsoft.com/PR/Keepers_WP.html49 The whole area of multi-factor (or two factor) authentication is complex. There are regulatory definitions, limitations and many additional factors. The examples above are merely for illustrative purposes. An excellent summary can be found at: Source: Two-factor Authentication, Wikipedia, 12 December 2012. See: http://en.wikipedia.org/wiki/Two-factor_authentication50 Source: German Hackers Publish Interior Minister’s Fingerprint to Protest Against Biometric IDs, GIZMODO, 30 March 2008. See: http://ca.gizmodo. com/373829/german-hackers-publish-interior-ministers-fingerprint-to-protest-against-biometric-ids51 Based on Deloitte Touche Tohmatsu Limited interviews with security experts and large companies.52 Deloitte Touche Tohmatsu Limited conducted an online survey with a global firm of more than 50,000 employees over a four week period. 1,797 responses were received. The survey was not randomly distributed, and responses did not reflect the geographic distribution of the firm’s employees. However, the distribution of respondents by age, position and function was a good match for the makeup of the overall employee base. The survey asked questions about a single Enterprise Social Networking (ESN) tool, and it should be noted that the firm also has an Intranet site, official knowledge management and collaboration tools, as well as a variety of ad hoc user groups on consumer social networks. The invitation to join the survey was disseminated by email, but also through the ESN in question. Therefore it seems likely that the survey results may overstate employee registration and engagement to some unknown extent. Still, although survey invitations were extended to over 5,500 employees belonging to two ESN champion groups, less than five percent of responses came from those ESN groups, with the other 95 percent coming from those contacted via email or phone. Finally, Deloitte Touche Tohmatsu Limited have had subsequent conversations with other global firms of varying sizes, using the same or different ESN solutions, and their experience is very closely in line with the survey findings. This Prediction is not about a specific ESN or implementation – the results (at this time) appear to be fairly consistent.53 Source: 1994 Design of SunWeb – Sun Microsystems’ Intranet, Sun Microsystems, 1994. See: http://www.useit.com/papers/sunweb/appears to have been among the first corporate intranets.54 Source: Intranet Statistics from Intranet Insider World Tour Live 09 NYC, Communitelligence, 17 April 2009. See: http://www.communitelligence.com/blps/ article.cfm?weblog=59&page=732 55 Source: Survey: “Twitter”, Total Statistics, Mediabistro, March 23, 2012. See: http://www.mediabistro.com/alltwitter/files/2012/04/AYTM-Market-Research- Twitter-Study.pdf56 Source: Twitter facts and figures, Reuters, July 2011. See: http://retelur.files.wordpress.com/2007/10/touch-agency-twitter-facts-and-figures-110907123758- phpapp02.pdf57 For the latter group, it is essentially moot whether they register or not.58 Excluding countries where there were insufficient answers (<25) to provide a meaningful sample. Technology, Media & Telecommunications Predictions 2013 53

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59 These numbers were not consistent among those that used the ESN and those that didn’t: “time restriction” was cited by 51 percent of users, but only 43 percent of non-users. Some 47 percent of non-users did not understand the use case, while that factor was only 38 percent of users.60 Once again, there were differences between the users and non-users: 61 percent of users wanted integration into existing business process vs. only 39 percent of non-users; and 46 percent of non-users wanted a “how to use the ESN” guide, vs. only 36 percent of users wanting that.61 Deloitte Touche Tohmatsu Limited estimates based on existing knowledge, conversations with industry players and published industry estimates.62a Source: Crowdfunding Platforms Raise $1.5 Billion and Successfully Fund One Million Campaigns in 2011, Finds Research Firm Massolution, Market Wire, 8 May 2012. See: http://www.marketwire.com/press-release/crowdfnding-platforms-raise-15-billion-successfully-fund-one-million-campaigns-2011-1654020.htm62b Source: Information Regarding the Use of the Crowdfunding Exemption in the JOBS Act, 23 April 2012. See: http://www.sec.gov/spotlight/jobsact/ crowdfundingexemption.htm63 Based on a Deloitte Canada review of multiple crowdfunding portals.64 The gaming category was responsible for nine of the 17 million dollar plus raises. Source: The most funded projects in Kickstarter history, Kickstarter, 28 November 2012. See: http://www.kickstarter.com/discover/most-funded?ref=sidebar65 Deloitte Canada analysis of publicly disclosed crowdfunding portals. The amounts we cite are likely to be lower bounds.66 Deloitte Canada analysis of publicly disclosed crowdfunding portals.67 Source: Global Venture Capital Volume Up in Q1, Deal Number Down, Science Business, 4 May 2011. See: http://sciencebusiness.technewslit.com/?p=4150 68 Source: Giving Statistics, Charity Navigator, 2012. See: http://www.charitynavigator.org/index.cfm?bay=content.view&cpid=42 69 Source: Some States Set Caps to Control Payday Loans, The New York Times, 6 September 2008. See: http://www.nytimes.com/2008/09/07/us/07payday.html?_r=070 Source: The Kings of Crowdfunding, Yahoo, 17 May 2012. See: http://news.yahoo.com/blogs/this-could-be-big-abc-news/kings-crowdfunding-164333954.html71 Source: Crowdfunding video games, The Economist, 8 September 2012. See: http://www.economist.com/node/21562213 72 Source: Spurned by VCs, a ship startup turns to Kickstarter, GigaOM, 27 September 2012. See: http://gigaom.com/cloud/spurned-by-vcs-a-chip-startup-turns-to- kickstarter/73 Source: Raising business finance through online investments, Crowdcube, 2012. See: www.crowdcube.com74 Source: Indiegogo Raises $15 Million Series A To Make Crowdfunding Go Mainstream, TechCrunch, 6 June 2012. See: http://techcrunch.com/2012/06/06/ indiegogo-funding-15-million-crowdfunding/75 Source: Trading Summary, Alpha Trading Systems, 2012. See: http://www.alphatradingsystems.ca/76 In the United States, securities regulation is principally a matter of federal jurisdiction under the SEC. In Canada it is under provincial control, through various Securities Commissions. Source: Ontario examines ways to loosen crowdfunding rules, The Globe and Mail, 29 November 2012. See: http://www. theglobeandmail.com/report-on-business/small-business/sb-money/business-funding/ontario-examines-ways-to-loosen-crowdfunding-rules/article5781219/77 Source: OSC warns ‘crowdfunding’ trend raises fraud worries, The Globe and Mail, 14 December 2012. See: http://www.theglobeandmail.com/report-on- business/small-business/sb-money/osc-warns-crowdfunding-trend-raises-fraud-worries/article6364610/78 Source: Where’s the Venture Capital?, Chief Executive Group, 11 July 2012. See: http://chiefexecutive.net/wheres-the-venture79 Source: SEC uses JOBS Act to set up new roadblocks to crowdfunding, Venture Beat, 31 August 2012. See: http://venturebeat.com/2012/08/31/sec-uses-jobs- act-to-set-up-new-roadblocks-to-crowdfunding/80 Source: Small Businesses Await Crownfunding Rules, The Wall Street Journal, 12 Decemeber 2012. See; http://professional.wsj.com/article/SB10001424127887 324339204578173731988591450.html?mod=WSJ_SmallBusiness_LEADNewsCollection&mg=reno64-wsj&utm_source=buffer&buffer_share=a7755 81 Source: Crowd-funding dark side: Sometimes investments go down drain, USA Today, 14 August 2012. See: http://usatoday30.usatoday.com/money/markets/ story/2012-08-14/crowd-funding-raising-money/57058678/1 82 Source: Crowd-funding dark side: Sometimes investments go down drain, USA Today, 14 August 2012. See: http://www.usatoday.com/money/markets/ story/2012-08-14/crowd-funding-raising-money/57058678/1 83 Source: Kickstarter’s Obsolescence Problem, Illustrated By A Fantastic iPhone Cable I’ll Never Use, TechCrunch, 26 September 2012. See: http://techcrunch. com/2012/09/26/kickstarters-obsolescence-problem-illustrated-by-a-fantastic-iphone-cable-ill-never-use/84 Source: Video game raises $4 million through crowdfunding, EtonDigital, 18 October 2012. See: http://www.etondigital.com/video-game-raises-4-million- through-crowdfunding/85 Source: Crowdfunding’ should be a red flag’ to backers, Develop, 3 October 2012. See: http://www.develop-online.net/news/42140/Crowdfunding-should-be-a- red-flag-to-contributors86 A few vendors have or plan to release TV sets with gesture control. Source: Hisense Unveils Cutting Edge XT880 4K UHD 3D Smart TV, Hisense, 6 November 2012. See: http://hisense-usa.com/pr/prFull.asp?prID=1487 For more information on the mechanics of voice recognition, Source: How Speech Recognition Works, HowStuffWorks, 2011. See: http://electronics. howstuffworks.com/gadgets/high-tech-gadgets/speech-recognition.htm. For information on how Kinect works, Source: How Motion Detection Works in Xbox Kinect, WIRED, 3 November 2010. See: http://www.wired.com/gadgetlab/2010/11/tonights-release-xbox-kinect-how-does-it-work/all/88 A minority of TVs, often in bedrooms, are likely to be used extensively to play console-based games.89 The first remote controls used audio recognition as an input. The challenge with this approach, as is the case now, was false positives and negatives. Some of the very first remote controls used very small hammers hitting very small tuning forks. Their tones were then picked up by a microphone on the TV set. Manufacturers carefully selected frequencies outside the range of human voices and most common household sounds, but carelessly failed to factor other household noises, from doorbells to dog collars.90 For more analysis on gesture control, Source: DH Jung, UK Berkeley School of Information, 2012. See: http://people.ischool.berkeley.edu/~donghyuk- jung/?page_id=161 91 Source: Samsung Smart TV Voice, Gesture and Face Recognition Hands-on, SlashGear, 24 May 2012. See: http://www.slashgear.com/samsung-smart-tv-voice- gesture-and-face-recognition-hands-on-24229664/54

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92 4K offer four times the resolution of the current highest standard high definition (2K) and is a mid-point to 8K high definition, which offers 16 times the resolution of the current best HD quality. 4K and 8K transmission has been under development for many years, but 4K and 8K standards were not agreed until 2012. Source: Ultra High Definition Television: Threshold of a new age, ITU, 24 May 2012. See: http://www.itu.int/net/pressoffice/press_releases/2012/31.aspx93 4K is the lower definition version of the Ultra High Definition (UHD) standard, 8K is the higher resolution variant. 8K is not expected to become commercially available until the 2020s. For a list of 4K TV sets announced: Source: Faster 4Kx2K, Slower AMOLED TV?, Display Search Blog, 13 September 2012. See: http:// www.displaysearchblog.com/2012/09/faster-4kx2k-slower-amoled-tv/94 Sources: 4K channels could launch in 2014, 3D Focus, 29 November 2012. See: http://www.3dfocus.co.uk/3d-news-2/ultra-hd/4k-channels-could-launch- in-2014/11300; First commercial 4K services coming by 2015, Smart TV Radar, 12 September 2012. See: http://www.smarttvradar.com/5303/first-commercial- 4k-services-coming-by-2015/95 For a discussion on some of the challenges of 4K adoption Source: 4K TVs are coming, but they face an uphill battle in the home, Ars Technica, 28 June 2012. See: http://arstechnica.com/gadgets/2012/06/4k-tvs-are-coming-but-they-face-an-uphill-battle-in-the-home/96 Source: SD remains dominant choice for worldwide DTH subscribers, says NSR, Broadcast Engineering, 17 September 2012. See:http://broadcastengineering. com/hdtv/sd-remains-dominant-choice-worldwide-dth-subscribers-says-nsr97 For example resolution on smartphones is now at 1K HD, equivalent to over 400 pixels per inch. This concentration of pixels makes individual pixels invisible to the standard human eye. Source: Why will you want a 1080p screen on your smartphone, GigaOM, 29 May 2012. See: http://gigaom.com/mobile/why-youll- want-a-1080p-screen-on-your-smartphone/98 One forthcoming games console is rumored to support 4K. Source: SONY’S PLAYSTATION 4 TO SUPPORT 4K RESOLUTION, BGR, 22 August 2012. See: http:// bgr.com/2012/08/22/playstation-4-4k-resolution/99 Sony and LG are among vendors that have already launched a 4K TV set. Source: 4K, 84-inch ‘ultra’ HDTV from LG is ready to start shipping now in Korea, worldwide next month, Engadget, 22 August 2012. See: http://www.engadget.com/2012/08/22/lg-4k-84-inch-uhdtv/. 4K overhead projectors are also available. Source: 4K home cinema front projector offering 4x the resolution of Full HD, Sony, 2012. See: http://www.sony.co.uk/pro/product/fpjhomecinema/ vpl‑vw1000es/overview100 For a list of 4K TV sets announced: Source: Faster 4Kx2K, Slower AMOLED TV?, DisplaySearch Blog, 13 September 2012. See: http://www.displaysearchblog. com/2012/09/faster-4kx2k-slower-amoled-tv/101 Price declines could be about 30 percent year-on-year in the short term. The actual price declines depend on demand. If demand for 4K demand is strong price decline will be faster.102 TV set manufacturing assumes a certain number of bad pixels per square inch, with a certain acceptable level of errors. If a manufacturing process delivers a good 50 inch glass 90 percent of the time and assuming the error rate is not affected by screen size, you would get 76 percent good (90 percent ^ 2.5) glass on an 80 inch line of TV sets (an 80 inch set has two and half times the surface area of a 50 inch set). However factoring in other issues, yields for 80 inch sets are likely to be much lower. This means the cost of making 80 inch sets is markedly higher than 50 inch sets. In terms of market share, one analyst has forecast that 4K screens will account for over 20 percent of the 50 inch and larger TV market. For a discussion on demand drivers for 4K screens: Source: Faster 4Kx2K, Slower AMOLED TV?, DisplaySearch Blog, 13 September 2012. See: http://www.displaysearchblog.com/2012/09/faster-4kx2k-slower-amoled-tv/103 About 50 films have been screened in 4K, but Hollywood plans to convert existing films to 4K. Laurence of Arabia is one title that has undergone conversion: Source: 4K channels could launch in 2014, 3D Focus, 29 November 2012. See: http://www.3dfocus.co.uk/3d-news-2/ultra-hd/4k-channels-could-launch- in-2014/11300 104 Some commentators have noted that an uncompressed 4K movie (4 terabytes in size) would require about 200 standard 25 GB Blu-ray disks for storage. Changing disc every few minutes might disrupt the viewing experience. However movies are compressed prior to being launched to the public. A compressed 4K movie could fit on a few standard Blu-ray discs or a single eight-layer disc. Source: Why Ultra HD isn’t ready to replace HD, TechRadar, 23 February 2012. See: http://www.techradar.com/news/television/tv/why-ultra-hd-isnt-ready-to-replace-hd-1065703 105 This assumes a NTB file and an average throughput of about 7.5 Mbit/s106 For more information on support for 4K standards: Source: Ivy Bridge Gets 4K Display Support in October, AnandTech, 9 November 2012. See: http://www. anandtech.com/show/6270/ivy-bridge-gets-4k-display-support-in-october . HDMI 2 is expected to support 4K.107 For a table showing iterations of the HDMI standard: Source: HDMI, Wikipedia. See: http://en.wikipedia.org/wiki/HDMI#Version_2.0 108 Source: Why Ultra HD isn’t ready to replace HD, TechRadar, 23 February 2012. See: http://www.techradar.com/news/television/tv/why-ultra-hd-isnt-ready-to- replace-hd-1065703109 BSkyB in the UK and SKY Perfect JSAT have been trialling capture of football in 4K. Source: Sky tests 4K at The Emirates, Broadcast, 11 October 2012. See: http://www.broadcastnow.co.uk/techfacils/sky-tests-4k-at-the-emirates/5047650.article; Source: SKY Perfect JSAT airs soccer game at 4K, BroadcastEngineering, 2 November 2012. See: http://broadcastengineering.com/satellite/sky-perfect-jsat-airs-soccer-game-4k110 Source: The opportunities for 4K video technology, Futuresource Consulting, November 2012. See: http://www.futuresource-consulting.com/press.html111 Readers may be interested in the progress of 8K ultra high definition (UHD). While the first broadcasts of 8K are not expected till the 2020s, the practicality of shooting in 8K is improving rapidly. One major improvement is in terms of weight. The first super high vision 8K cameras weighed more than the average adult at 80kg. As of end 2012, the weight of 8K cameras had fallen to 4 kg.112 For example: Source: Canon has unveiled the 4K EOS-1D C, Canon, April 2012. See: http://cpn.canon-europe.com/content/news/canon_unveils_4K_eos_1d_c.do113 Source: Resellers snap up 4K Sony cameras, Broadcast, 19 November 2012. See: http://www.broadcastnow.co.uk/techfacils/resellers-snap-up-4k-sony- cameras/5049124.article (requires subscription to read the full article); Source: Red 4K Cinema Player, Red. See: http://www.red.com/products/redray114 HEVC, also known as H.265, is the successor to H.264. It breaks video frames into blocks of 64x64 pixels versus 16x16 for H.264. For more information: Source: HEVC, a new weapon in codec wars, to appear in September, CNET, 22 August 2012. See: http://news.cnet.com/8301-1023_3-57498163-93/hevc-a-new- weapon-in-codec-wars-to-appear-in-september/; Source: High Efficiency Video Coding (HEVC), Fraunhofer. See: http://hevc.hhi.fraunhofer.de/115 As of H2 2012, 4K transmission was possible within a 50 Mbit/s link. In 2013, 4K trial broadcasts are expected to start in Korea, at between 30 and 40 Mbit/s. Source: First 4K Ultra High Definition Transmission via ASTRA 3B, Enhanced Online News, 7 September, 2012. See: http://eon.businesswire.com/news/ eon/20120907005241/en ; Source: Get Ready For 4K and 8K Broadcasts (if you live in Korea or Japan), definitionmagazine, 8 November 2012. See: http://www. definitionmagazine.com/journal/2012/11/8/get-ready-for-4k-and-8k-broadcasts-if-you-live-in-korea-or-j.html Technology, Media & Telecommunications Predictions 2013 55

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116 Capacity offered through high throughput satellite (HTS) systems is expected to increase through 2015 to over 450 Gbit/s from 77 Gbit/s in 2010. The number of HTS capacity suppliers should increase. Source: TV most robust growth driver for satellite industry, Broadband TV News, 11 August, 2011. See: http:// www.broadbandtvnews.com/2011/08/11/tv-most-robust-growth-driver-for-satellite-industry/. For a view on recent increases in capacity: Source: Video brings solid growth for satellite, Broadband TV News, 23 August, 2012. See: http://www.broadbandtvnews.com/2012/08/23/video-brings-solid-growth-for-satellite/. For information on readiness to transmit via satellite in 4K: Source: Satellites Ready for Ultra HD, Triple-play, Digital Cinema, New-generation Newsgathering and More, PRNewswire, 5 September, 2012. See:http://www.prnewswire.com/news-releases/eutelsat-at-ibc-2012-satellites-ready-for-ultra-hd-triple-play-digital- cinema-new-generation-newsgathering-and-more-168581206.html; Source: First 4K Ultra High Definition Transmission via ASTRA 3B, Enhanced Online News, 7 September, 2012. See: http://eon.businesswire.com/news/eon/20120907005241/en117 Source: Astra plans 4K and iPad for HD+, Broadband TV News, 29 November, 2012. See:http://www.broadbandtvnews.com/2012/11/29/astra-plans-4k-and- ipad-for-hd/118 According to research, higher picture quality discourages channel hopping. Source: Get Ready For 4K and 8K Broadcasts (if you live in Korea or Japan), definitionmagazine, 8 November, 2012. See: rhttp://www.definitionmagazine.com/journal/2012/11/8/get-ready-for-4k-and-8k-broadcasts-if-you-live-in-korea- or-j.html119 The need for a reason to upgrade is particularly pressing given recent declines in sales volumes of TV sets. Source: LCD TV shipments decline for first time ever, CNN Money, 21 June, 2012. See: http://money.cnn.com/2012/06/21/technology/TV-shipments-LCD/index.htm120 For a discussion on the impact of high resolution screens in phones, tablets and computers: Source: Why does a retina display matter?, TechRadar, 2 June, 2012. See: http://www.techradar.com/news/mobile-computing/tablets/why-does-a-retina-display-matter-1082433 121 For a discussion on pixel density: Source: Will Apple Keep Upgrading Display Resolution?, DisplaySearch Blog, 8 November, 2012. See: http://www. displaysearchblog.com/2012/11/will-apple-keep-upgrading-display-resolution/122 For an analysis of how the multiple streams of TV and Web content were consumed in the UK during the Olympic Games, the BBC has provided in-depth commentary on demands for content for each category content and each device. Deloitte’s view is that much of the consumption of content in peak time would have been based on multiple devices, that is combining TV broadcast (one or more streams), online video and online text. Source: The story of the digital Olympics: streams, browsers, most watched, four screens, BBC, 13 August 2012. See: http://www.bbc.co.uk/blogs/bbcinternet/2012/08/digital_olympics_reach_ stream_stats.html123 There have also been attempts to provide a single screen solution by using 3D technology. 3D TV signals work by sending alternative left and right eye images. 3D glasses have distinct left and right lens characteristics, which enable the creation of a 3D image in the viewer’s brain. One other use of 3D is to broadcast alternate programs on each frame, with one program shown on one frame, and the other on the subsequent one. One viewer is given a set of glasses with the equivalent of two left lenses; the other gets two right lenses. This enables each viewer to see one program, but not the other. That is the theory; the practice is that the viewer is still able to see a small, but sufficiently distracting, amount of two programs, which means this approach is not yet fully viable.124 Prices obtained from popular e-commerce sites in a range of countries in December 2012.125 For data on the rising size of television screens, see: Percentage of TV sets sold, by screen size, Ofcom, 2012: http://stakeholders.ofcom.org.uk/market-data- research/market-data/communications-market-reports/cmr12/tv-audio-visual/uk-2.12 126 According to analysts, connected TV sales should be in the high tens of millions in 2013; the installed base should reach into the hundreds of millions. Note that these are number for TVs with integrated connectivity. Hundreds of millions more households can readily connect their TV sets via peripherals. Sources: Smart TV Growth For 2012 Pegged At 15%, But North Americans Still Slow To Adopt, TechCrunch, 17 October 2012. See: http://techcrunch.com/2012/10/17/smart-tv- growth-for-2012-pegged-at-15-but-north-americans-still-slow-to-adopt/; A fifth of TV sets connected to the Internet by 2016, Digital TV Research, 2 November 2011. See: http://www.digitaltvresearch.com/ugc/press/22.pdf127 As of Q1 2012, smart TVs, which incorporate connectivity, had 20 percent market share in the UK, up from five per cent share two years previously. Source: The Communications Market 2012, Figure 2.16, Ofcom, July 2012. See: http://stakeholders.ofcom.org.uk/binaries/research/cmr/cmr12/UK_2.pdf128 One survey found that about half of connected TV sets had actually been connected. Source: Half of Internet TVs Aren’t Connected, TechNewsDaily, 17 February 2012. See: http://www.technewsdaily.com/3827-exclusive-internet-tvs-connected.html. Research undertaken by Ofcom in the UK found that 60 percent of those that purchased a smart TV (which incorporates connectivity) did so because “I needed a new TV and decided to buy one with the latest technology”. By contrast one fifth did so because “I liked the range of internet connected services available” and 27 percent noted that “It was nothing to do with the internet functionality of the TV”. Source: The Communications Market 2012, Ofcom, July 2012, Figure 2.17. See: http://stakeholders.ofcom.org.uk/binaries/ research/cmr/cmr12/UK_2.pdf. These findings are echoed by others who note that purchasers of connected TV sets in the US buy a connected set because the best TVs come with connectivity, not because connectivity necessarily defines the best TVs. Source: Sure, People Will Buy ‘Connected TVs,’ But Will Anyone Actually Use Them?, paidContent, 30 August 2010. See: http://paidcontent.org/2010/08/30/419-sure-people-will-buy-connected-tvs-but-will-anyone-actually- use-them/129 According to one survey in the UK, about half of those with a connected TV set had connected it. Source: The year of connected TV, Page 7, Harris Interactive, June 2012. See: http://www.harrisinteractive.com/vault/HI_UK_TMTE_Reports_ConnectedTV.pdf130 Research undertaken in the UK published in June 2012 found that 13.5 percent of households claimed to have a connected TV set. Source: No rise in take-up of connected TVs, Broadcast, 15 June 2012. See: http://www.broadcastnow.co.uk/news/multiplatform/no-rise-in-take-up-of-connected-tvs/5043288.article (requires subscription to read the full article); Research conducted by Deloitte LLP on the UK market (4,000 respondents, nationally representative) at that time found that 43 percent of households have a games console capable of accessing TV content via dedicated broadcaster channels apps. For more information, see: TV: Why? Perspectives on the UK television sector 2012, Deloitte LLP, August 2012: www.deloitte.co.uk/television131 As of 2010, according to OECD data, in 27 countries around the world, household broadband penetration had surpassed 60 percent. In these countries broadband penetration rates would likely have risen, to at least 65 percent, by January 2013. In at least half of these countries, broadband speeds should be sufficient to enable TV or movies-on-demand to connected TV sets. For more data on broadband penetration; Source: OECD Broadband Portal, The Organisation for Economic Co-operation and Development (OECD), December 2011. See: http://www.oecd.org/internet/broadbandandtelecom/oecdbroadbandportal.htm132 For a collection of discussions on connected TV, see: Connected TV, Guardian: http://www.guardian.co.uk/media-network/connected-tv133 For example, in the UK one of the companies offering an OTT service is a leading pizza delivery company. Source: Pizza chain launches VOD service in U.K., Variety Insight, 30 October 2012. See: http://www.variety.com/article/VR1118061416 134 Deloitte LLP estimate based on Ofcom number for 2011 of $370 billion. Source: Global TV revenue climbs, C21 Media, 14 December 2011. See: http://www.c21media.net/archives/74097 56

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135 Usage of digital video recorders (DVRs) and on demand services are often similar. Deloitte LLP has undertaken research on the time period in which programs recorded to DVRs are watched. In the UK about 70 percent of pre-recorded reality TV, sports, news and current affairs and soap operas are watched within a day of first broadcast; between 82 percent and 88 percent of these programs are watched within two days of first broadcast; between 95 percent and 100 percent are watched within a week. Source: Deloitte LLP and GfK, June 2012.136 The most-watched programs on the BBC’s iPlayer are recently broadcast programs. Source: Monthly Performance Pack, Page 13, BBC, October 2012. See: http://downloads.bbc.co.uk/mediacentre/iplayer/iplayer-performance-oct12.pdf137 For example in the UK, one on demand service called SeeSaw was launched by a national TV infrastructure company. While this company provides services to much of the country, it is not a consumer brand, and hence had to create a new brand for its business to consumers. Source: SeeSaw chief executive looks forward to launch, The Telegraph, 14 February 2010. See: http://www.telegraph.co.uk/technology/news/7223006/SeeSaw-chief-executive-looks-forward-to-launch.html138 The BBC’s iPlayer service had 165 million requests for TV programs in October 2012 – a record, and a 23 percent increase on the 134 million requests in the previous October. This represents less than three programs per month for every potential user of the service. Source: Monthly Performance Pack, Page 4, BBC, October 2012. See: http://downloads.bbc.co.uk/mediacentre/iplayer/iplayer-performance-oct12.pdf139 A multichannel video programming distributor (MVPD) is a service provider delivering video programming services, usually for a subscription fee (pay TV). These operators include cable television (CATV) systems, direct-broadcast satellite (DBS) providers, and wireline video providers such as competitive local exchange carriers (CLECs) using IPTV. In Canada these same players are called Broadcast Distribution Undertakings (BDUs). There are just under 100 million pay TV subscriptions in the United States, and 11.5 million in Canada.140 One survey found that that 31 percent of current mobile/connected TV viewers were either planning to cancel their pay TV service in the next year or seriously considering cancelling. Of those, 81 percent saying online over-the-top video options are the primary reason. Source: Tremor Video Study Finds Increased Mobile Video Consumption In The Home, Business Wire, 30 May 2012. See: http://www.businesswire.com/news/home/20120530005878/en/Tremor-Video- Study-Finds-Increased-Mobile-Video141 Source: OVER-THE-TOP SERVICES ARE FAR MORE LIKELY TO APPEAL AS COMPLEMENTARY, RATHER THAN PRIMARY, PAY-TV SERVICES, Analysys Mason, 21 July 2011. See: http://www.analysysmason.com/About-Us/News/Insight/Insight_payTV_Europe_Jul2011/142 It is important to use a four quarter number: there is pronounced seasonality in pay TV additions and cancellations, with Q1 and Q4 being positive, and Q2 and Q3 being negative. Source: Cord-Keeping: Pay TV Shrinks for the Quarter, Stays Steady for the Year, All Things D, 7 November 2012. See: http://allthingsd. com/20121107/cord-keeping-pay-tv-shrinks-for-the-quarter-stays-steady-for-the-year/143 BMO Capital Markets proprietary research, November 2012.144 Less than 15 percent of North Americans get any TV from terrestrial broadcasts.145 For example in Germany there is license fee of about €18 [$47] per month, in the UK there is a license fee of £145 [$190] per year. Source: German TV licence fee to remain stable, Rapid TV News, 18 January 2012. See: http://www.rapidtvnews.com/index.php/2012011818885/german-tv-licence-fee-to-remain- stable.html; Source: TV Licence types and costs, TV Licensing. See: http://www.tvlicensing.co.uk/check-if-you-need-one/topics/tv-licence-types-and-costs-top2/; Source: Television licence, Wikipedia. See: http://en.wikipedia.org/wiki/Television_licence146 Source: Connected-TV and pay-TV operator partnerships: Harnessing market disruption for mutual gain, informa telecoms & media. See: http://www. informatandm.com/wp-content/uploads/2012/02/ITM-CES-Connected-TV-White-Paper.pdf147 In North America, pay TV rates have tended to drop when the economy is weak and rise when it recovers. Globally, the relationship is less clear: even during recent European economic weakness, pay TV penetration has been increasing.148 Source: New households growing in the U.S., 7 November 2012, Business First. See: http://www.bizjournals.com/louisville/blog/morning_call/2012/11/new- households-growing-in-the-us.html; New household formation is a complex topic. In between national censuses, it is an estimate based on smaller samples, and subject to frequent revision. Since 2008, levels of household formation have been much lower than historical rates, but seem to be accelerating in late 2012 to over 1.15 million households year-over-year, more than 70 percent higher than the average following the recession.149 Source: Cord-Keeping: Pay TV Shrinks for the Quarter, Stays Steady for the Year, All Things D, 7 November 2012. See: http://allthingsd.com/20121107/cord- keeping-pay-tv-shrinks-for-the-quarter-stays-steady-for-the-year/150 BMO Capital Markets proprietary research, November 2012.151 Source: Time Warner CEO: Cord cutters not an issue, “cord nevers” might be, paidContent, 16 November 2012. See: http://paidcontent.org/2012/11/16/time- warner-ceo-cord-cutters-not-an-issue-cord-nevers-might-be/152 Based on interviews with multiple North American broadcasters and distributors.153 Based on interviews with multiple North American broadcasters and distributors.154 Source: The NPD Group: Average Monthly Pay – TV Subscription Bills May Top $200 by 2020, The NPD Group, 10 April 2012. See: https://www.npd.com/wps/ portal/npd/us/news/press-releases/pr_120410/; Average US pay TV bill was $86 in 2011, and assumed to grow at six percent, so over $90 in 2012.155 Source: Cord-Cutting: Cable’s Offer You Can’t Refuse, The Wall Street Journal, 13 November 2012. See: http://online.wsj.com/article/SB1000142412788732407 3504578109513660989132.html156 The exact amount would depend on the bit rate and the amount of shared watching. Different ISPs have different data caps, speeds, and pricing plans. Potential cord cutters may not be the “average” North American TV watcher, and therefore need or not need to pay more for data.157 Assuming 2.5GB per hour and two people per household, requiring 1.2 Mbit/s downstream. Bandwidth requirements vary by provider. Some services have variable rate throughput, with bandwidth dynamically variable according to the speed of the broadband connection and/or the device on which video is being used.158 Source: The Cross-Platform Report, Nielsen, 15 June 2011. See: http://www.slideshare.net/genarobardy/nielsen-crossplatform-report-q1-2011159 The GSA forecasts that 209 LTE commercial networks will be available by the end of 2013. Up to 10 operators may have launched the next iteration of LTE Release 8, also known as LTE advanced. LTE Release 8 can support up to 300Mbit/s in a 20MHz channel with 4x4 MIMO or by using 2 carriers of 20MHz, i.e. 40MHz of spectrum, but using a 2x2 MIMO. LTE Advanced Release 10 can support over 1Gbit/s with at least four aggregated carriers of 20MHz each (and up to 100MHz of spectrum) using a 4x4 MIMO. Sources: Evolution to LTE Report, Global Mobile Suppliers Association, 2 November 2012. See: http://www.gsacom.com/downloads/pdf/GSA_Evolution_to_LTE_report_011112.php4 (requires subscription to read the full article); Russia Gets LTE‑Advanced, Telecom Weekly, 24 October 2012. See: http://www.lightreading.com/document.asp?doc_id=226310 Technology, Media & Telecommunications Predictions 2013 57

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160 Source: Rapid Advance of LTE Spurs Convergence of Electronic Products, IHS iSuppli, 29 August 2012. See: http://www.isuppli.com/Mobile-and-Wireless- Communications/News/Pages/Rapid-Advanceof-LTE-Spurs-Convergence-of-Electronic-Products.aspx161 Source: TeliaSonera first in the world with 4G services, TeliaSonera, 14 December 2009. See: http://www.teliasonera.com/en/newsroom/press-releases/2009/12/ teliasonera-first-in-the-world-with-4g-services/162 Source: LTE: What happened and what’s next, Telecom Asia, 12 September 2012. See: http://www.telecomasia.net/content/lte-what-happened-and-whats- next?page=0%2C1 163 Sources: LTE subscriber base reaches 12 million at the end of 2011, Fierce Wireless, 13 March 2012, see: http://www.fiercewireless.com/press-releases/ lte-subscriber-base-reaches-12-million-end-2011; Global 3G connections reach 1B, says industry group, Telecom Asia, 27 January 2012, see: http://www. telecomasia.net/content/global-3g-connections-reach-1b-says-industry-group164 According to Canalys, as of the end of Q2 2012, there were almost 17 million LTE-enabled smartphones shipped in United States, which account for almost 60 percent of all LTE-enabled smartphones shipped worldwide.165 Source: Rapid Advance of LTE Spurs Convergence of Electronic Products, IHS iSuppli, 29 August 2012. See : http://www.isuppli.com/Mobile-and-Wireless- Communications/News/Pages/Rapid-Advanceof-LTE-Spurs-Convergence-of-Electronic-Products.aspx166 Source: Status of the LTE Ecosystem, Global Mobile Suppliers Association, 28 October 2011. See : http://www.gsacom.com/downloads/pdf/GSA_197_LTE_ devices_Form_Factors.php4 (requires subscription to read the full article)167 Source: Status of the LTE Ecosystem, Global Mobile Suppliers Association, 23 November 2012. See: http://www.gsacom.com/downloads/pdf/gsa_lte_ecosystem_ report_231112.php4 (requires subscription to read the full article)168 The vast majority of LTE chipsets support only four to five of the eight main bands on which LTE networks are run globally: in North America, 700/800 and 1700/1900 MHz are used; 2500 MHz in South America; 800, 900, 1800, 2600 MHz in Europe; 1800 and 2600 MHz in Asia; and 1800 MHz in Australia. In some cases LTE support may come included as part of an integrated chipset that combines various capabilities including LTE. However the LTE capability may only be effective if combined with other hardware parts such as signal amplifier and filter. Upgrading the radio hardware on a smartphone is very unusual so such devices, while supporting LTE, are very unlikely to be ever used on an LTE network due to the upgrade cost. Source: Nexus 4 Features Hidden LTE Chip, International Business Times, 26 November 2012. See: http://www.ibtimes.com/nexus-4-features-hidden-lte-chip-footage-explains-how- activate-4g‑lgs-new-handset-videos-900174. For more information on LTE frequency bands Source: LTE (telecommunication), Wikipedia, 29 November 2012. See: http://en.wikipedia.org/wiki/LTE_(telecommunication)#Frequency_bands169 Source: Teardown of HTC ThunderBolt Provides Insights on Rumored LTE iPhone, IHS iSuppli, 8 July 2011. See: http://www.isuppli.com/Teardowns/News/Pages/ Teardown-of-HTC-ThunderBolt-Provides-Insights-on-Rumored-LTE-iPhone.aspx170 The incremental cost of adding LTE is likely to vary by type of chipset. Variables include the number of frequencies supported and additional technologies supported on that chipset, such as GPS and GLONASS. High-end phones are likely to include high-end, complex chipsets, offering support for multiple technologies. For vendors, the ability to have one phone that works in most markets can have a marked impact on economies of scale. For further information on pricing dynamics; Source: Samsung reduces its LTE chip cost by half, CNET, 6 February 2012. See: http://www.cnet.com/8301-17918_1-57372289-85/ samsung-reduces-its-lte-chip-cost-by-half/. The iPhone 5’s baseband chip and RF transceiver cost $34 as compared to $23.5 for the non-LTE iPhone 4S. Source: Many iPhone 5 Components Change, But Most Suppliers Remain the Same, Teardown Reveals, IHS iSuppli, 25 September 2012. See: http://www.isuppli.com/ Teardowns/News/pages/Many-iPhone-5-Components-Change-But-Most-Suppliers-Remain-the-Same-Teardown-Reveals.aspx171 Bharti Airtel which has garnered 4,000 4G customers 6 months after launch is expecting 4G speeds to reduce from the 10-30 Mbit/s achieved currently to 10 Mbit/s after 30 percent utilization. Source: Airtel sees 3G handset prices falling 30% by next year, Daily News & Analysis, 21 September 2012. See: http://www.dnaindia.com/money/report_airtel-sees-3g-handset-prices-falling-30pct-by-next-year_1743305 172 For example, as of October 2012, the 12 percent of Verizon’s contract subscribers that had an LTE handset generated 35 percent of all its data traffic. In a few months, 4G traffic is likely to increase to 50 percent of the total. Source: Verizon: 35% of data traffic now rides over LTE, GigaOM, 9 October 2012. See: http://gigaom.com/mobile/verizon-35-of-data-traffic-now-rides-over-lte/173 Source: 3G and 4G Wireless Speed Showdown: Which Networks Are Fastest?, PC World, 16 April 2012. See: http://www.pcworld.com/article/253808/3g_ and_4g_wireless_speed_showdown_which_networks_are_fastest_.html174 Fixed broadband speeds are often in the tens of Mbit/s sometimes in the hundreds of Mbit/s. For a view on the UK: UK average broadband speed faster, Ofcom reveals, BBC, 15 August 2012. See: http://www.bbc.co.uk/news/technology-19267090; Virgin Broadband speeds going up from today, CNET UK, 9 October 2012. See: http://crave.cnet.co.uk/software/virgin-broadband-speeds-going-up-from-today-50009426/175 Source: DOCOMO Develops World’s First Small-cell Base Station for 3G and LTE, NTT Docomo Press Release, 16 November 2012. See: http://www.nttdocomo. com/pr/2012/001620.html176 Source: Carrier WiFi Offload, Wireless 20/20, March 2012. See: http://www.wireless2020.com/docs/CarrierWiFiOffloadWhitePaper03202012.pdf177 Source: Analysis: Germany rolls-out LTE to rural areas, Wireless Intelligence, 2 June 2011. See: https://wirelessintelligence.com/analysis/2011/06/germany-rolls- out-lte-to-rural-areas/283/178 Voice over LTE services launched for the first time in 2012. A few operators only offered VoLTE in 2012 including Metro PCS in the US, and SK Telecom in Korea. Source: MetroPCS Claims World’s First Voice-over-LTE Service, PC World, 7 August 2012. See: http://www.pcworld.com/article/260557/metropcs_ claims_worlds_first_voiceoverlte_service.html; Source: World’s first Voice over LTE launches in Korea; US stuck with 3G calls, Ars Technica, 7 August 2012. See: http://arstechnica.com/information-technology/2012/08/worlds-first-voice-over-lte-launches-in-korea-us-stuck-with-3g-calls/179 Source: LTE users consume significantly more mobile data when services are priced and marketed in the right way, Telecoms.com, 14 November 2012. See: http://www.telecoms.com/53073/lte-users-consume-significantly-more-mobile-data-when-services-are-priced-and-marketed-in-the-right-way/180 Data usage may still be constrained by data caps on LTE data packages, which from Deloitte Touche Tohmatsu Limited’s research do not appear much different to 3G data caps.181 One analyst has projected that LTE ARPUs will peak in 2012 at $88 per month. Estimates for 2013 are for ARPU to be lower but still much higher than the industry average at $70. ARPU is forecast to decline thereafter as the base swells. Sources: Mind Commerce Reveals LTE Basic Service ARPU to Begin Decline in 2013, PRWeb, 28 May 2012: http://www.prweb.com/releases/2012/5/prweb9536982.htm; Global LTE ARPU, Mind Commerce, 28 March 2012: http:// mindcommerce.files.wordpress.com/2012/03/lte_subscriber_arpu.jpg58

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182 Source: 4G LTE Revenues Projected to Exceed $100bn Globally in 2014, Despite Uncertainty about New Data Plans, Juniper Research, November 2010. See: http://www.juniperresearch.com/viewpressrelease.php?pr=213_%22183 A 45 minute show on the BBC’s iPlayer formatted for a smartphone is 240MB in SD and 465MB in HD. Not all services have the same degree of compression, hence the range used for more information. Sources: BBC iPlayer: http://www.bbc.co.uk/iplayer/; Mobile broadband usage guide: what can you get for your gigabyte?, BroadbandGenie, June 2012: http://www.broadbandgenie.co.uk/mobilebroadband/help/mobile-broadband-usage-guide-what-can-you-get-for- your‑gigabyte184 Tele 2 Sweden offers 80GB data package for 349 SEK($53)/month, with one GB on the LTE network priced at $0.66. Source: Tele 2: http://4g.tele2.se/. Verizon Wireless charges $5.5 per GB of LTE data. Source: Americans Paying More for LTE Service, The New York Times, 15 October 2012. See: http://www. nytimes.com/2012/10/15/technology/americans-paying-more-for-lte-service.html?_r=0 185 At end of Q2 2012, Tele 2 which prices one GB of LTE data at $0.66 had 70,000 LTE subscribers, equivalent to less than five percent of its customer base of 3.8 million. Sources: Interim Report, Tele2 AB, 30 June 2012: http://www.tele2.com/T2_Q2_2012_ENG_final.pdf; Tele2 grows sales 10%, EBITDA drops 3%; LTE gains 70,000 users, TeleGeography, 19 July 2012: http://www.telegeography.com/products/commsupdate/articles/2012/07/19/tele2-grows-sales-10- ebitda-drops-3-lte-gains-70000-users/. The best value 4G data tariff at the world’s largest LTE operator Verizon Wireless charged $5.50 per GB. As of Q3 2012, Verizon had a customer base of 14.9 million LTE subscribers, equivalent to 16 percent of its customer base of 95.9 million. Source: 3rd Quarter 2012 Earnings Results, Verizon, 18 October 2012: http://www22.verizon.com/idc/groups/public/documents/adacct/3q12_earnings_release_slides.pdf186 This is not merely due to the marginal price per GB of data. The technology behind LTE is quite good at providing very fast speeds to a number of users across a cell. But if too many users are in a concentrated area (like a bus or train), the speed throughput in that very narrow segment (as seen from the cell tower) will drop sharply. Further, having those users all watching high speed video while moving at 50-100 kilometers per hour could create severe hand-off discontinuities. Finally, depending on the bus or train, the amount of steel in the carriage might prevent (depending on which band is being used) the LTE signal from penetrating at a high speed modulation rate, once again causing realized speeds to drop over 90 percent.187 For example, both Verizon and AT&T see strong uptake of their shared plans, which were introduced as an alternative to the all-you-can-eat plans. Sources: Verizon subscribers give ‘Share Everything’ plans a boost, CNET, 18 October 2012. See: http://news.cnet.com/8301-1035_3-57535137-94/verizon-subscribers- give-share-everything-plans-a-boost/Source: AT&T Activates 4.7M iPhones, Signs Up 2M for Shared Data, PC Mag, 24 October 2012. See: http://www.pcmag. com/article2/0,2817,2411344,00.asp188 Source: Japanese youth dumping fiber lines for LTE, GigaOM, 21 November 2012. See: http://gigaom.com/2012/11/21/japanese-youth-dumping-fiber-lines- for‑lte/189 Source: China speeds up its LTE schedule, could issue permits ‘within a year’, Engadget, 11 September 2012. See: http://www.engadget.com/2012/09/11/china- speeds-up-lte-schedule/190 The definition of a smartphone for this prediction is based on consumer perceptions of what a smartphone is, rather than the standard industry definition, which pivots on the type of operating system (OS) used. Many consumers, particularly middle majority adopters, are likely to consider phones as smart if they have touch screens or full keyboards and they can use apps and not based on what intangible OS is under the hood.191 In 2013, any full touch-screen based device, and in some markets, any device with a full QWERTY keyboard, might be described by manufacturers, presented by salespeople, or perceived by purchasers as a smartphone. However in marketing and in stores there is no enforceable rule on what can or cannot be promoted as a smartphone, and the smartphone moniker is likely to describe an increasingly diverse range of capabilities. Differences among smartphones are driven by their bill of materials and manifest most typically in: screen quality (which determines the quality of video and image playback); camera; processor speed (which will affect a whole range of multimedia applications, from games play to browsing and navigation); memory size and type (the larger the quantity of integral solid state storage, the faster applications can load up and data can be retrieved, plus more content can be stored) and generations of networks supported (high-end phones are more likely to support 3G networks, and are much more likely to have 4G LTE support).192 The smartphone share of all phones may rise to 80 percent of the total. Source: At 50% the US smartphone market is not showing signs of saturation, Asymco, 3 July 2012. See: http://www.asymco.com/2012/07/03/us-smartphone-market-not-showing-signs-of-saturation/193 However, some respondents may not perceive the use of online apps as using the Internet. The Deloitte Global Mobile Consumer Survey is a 15-country survey of mobile phone users around the world. All research has been undertaken via online research. Fieldwork took place between May to June 2012. In Belgium, Canada, Finland, France, Germany, Japan, the UK and the United States are nationally representative. In Argentina, Brazil, Croatia, Mexico, South Africa and Turkey, the online research approach used results in a high concentration of urban professionals. These are likely to be relatively high earners within their country. For more details, see: The state of the global mobile consumer, Deloitte Touche Tohmatsu Limited, December 2012. See: www.deloitte.com/ mobileconsumer194 The Deloitte Global Mobile Consumer Survey is a 15-country survey of mobile phone users around the world. For more details, see: The state of the global mobile consumer, Deloitte Touche Tohmatsu Limited, December 2012. See: www.deloitte.com/mobileconsumer195 The Deloitte Global Mobile Consumer Survey is a 15-country survey of mobile phone users around the world. For more details, see: The state of the global mobile consumer, Deloitte Touche Tohmatsu Limited, December 2012. See: www.deloitte.com/mobileconsumer196 There are initiatives to develop smartphones at a $50 price point for developing markets. Source: Developing-market carriers call for sub-$50 smartphone, PC World, 28 February 2012. See: http://www.pcworld.com/article/250863/developingmarket_carriers_call_for_sub50_smartphone.html; Several vendors are designing specifically for entry-level smartphones. Sources: Qualcomm plans to design chips for low-end smartphones, The Times of India, 1 December 2012. See: http://timesofindia.indiatimes.com/tech/enterprise-it/strategy/Qualcomm-plans-to-design-chips-for-low-end-smartphones/articleshow/17442039.cms; ARM planning for ultra low-cost smartphones, TechRadar, 6 September 2012. See: http://www.techradar.com/news/phone-and-communications/mobile-phones/arm- planning-for-ultra-low-cost-smartphones-1095175197 For more information, see: The $100 “smartphone” reaches its first half billion, TMT Predictions 2012, Deloitte Global Service Limited, 17 January 2012: www.deloitte.com/tmtpredictions198 For example, in Pakistan, Yemen and Algeria, 3G services have not been rolled-out yet. In Rwanda 3G is being rolled out. Source: At long last: Govt starts laying groundwork for 3G auction, Tribune, 21 September 2012. See: http://tribune.com.pk/story/440050/at-long-last-govt-starts-laying-groundwork-for-3g-auction/; Source: ITU, 2012. See: http://www.itu.int/net/newsroom/connect/arab/2012/reports/statistical_overview.aspx; Source: Airtel to roll out 3G services in Rwanda in next quarter, NDTV Profit, 27 May 2012. See: http://profit.ndtv.com/news/corporates/article-airtel-to-roll-out-3g-services-in-rwanda-in-next-quarter-305086 199 For a view on app issues on entry level smartphones: Source: Low-End Smartphones Mean More Testing, Mobile App Testing, 29 February 2012. See: http://www.mobileapptesting.com/low-end-smartphones-mean-more-testing/2012/02/ Technology, Media & Telecommunications Predictions 2013 59

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200 The Deloitte Global Mobile Consumer Survey is a 15-country survey of mobile phone users around the world. All research has been undertaken via online research. Fieldwork took place between May to June 2012. In Belgium, Canada, Finland, France, Germany, Japan, the UK and the United States are nationally representative. In Argentina, Brazil, Croatia, Mexico, South Africa and Turkey, the online research approach used results in a high concentration of urban professionals. These are likely to be relatively high earners within their country. For more details, see: The state of the global mobile consumer, Deloitte Touche Tohmatsu Limited, December 2012. See: www.deloitte.com/mobileconsumer201 In Africa, take up of 3G services remains modest, with one operator identifying price as being a barrier to adoption. Source: Kenya to roll out $500m 4G network, The East African, 24 November 2012. See: http://www.theeastafrican.co.ke/news/Kenya-to-roll-out-500m-US-dollars-4G-network-/-/2558/1628252/-/ ue1dp7/-/index.html ; In India, in Q1 2012, 3G subscribers were four percent of the entire base. Source: India moves to kickstart 3G, Mobile World Live, 5 July 2012. See: http://www.mobileworldlive.com/india-moves-to-kickstart-3g/202 In China a sweet spot for smartphones is 1,000 yuan ($157). Devices priced at 1,000 yuan are lower are driving the feature phone to smartphone replacement market in China. Source: The Battle for China’s Low-End Smartphone Market, The Wall Street Journal, 22 June 2012. See: http://online.wsj.com/article/SB10001 424052702304765304577482000321643104.html203 Source: 3G growth stalls in Vietnam, Wireless Intelligence, 2012. See: https://wirelessintelligence.com/analysis/2012/04/3g-growth-stalls-in-vietnam/204 Reading about those whose holidays have been blighted abroad by large data roaming charges can put some people off from any form of mobile data package. Often bill shock occurs from mobile data bills inadvertently run up when on holiday abroad. This affects very few individuals, and is relatively simple to address, for example through turning mobile data roaming off from the phone. Source: Don’t let roaming phone charges wreck your holiday when you jet off abroad, This is Money, 24 July 2012. See: http://www.thisismoney.co.uk/money/holidays/article-2178395/Mobile-roaming-charges-How-avoid-shock-bill.html205 Source: The Family Struggle Over Skyrocketing Smartphone Bills, Mobiledia, 3 October 2012. See: http://www.mobiledia.com/news/164520.html206 The Deloitte Global Mobile Consumer Survey is a 15-country survey of mobile phone users around the world. All research has been undertaken via online research. Fieldwork took place between May to June 2012. In Belgium, Canada, Finland, France, Germany, Japan, the UK and the United States are nationally representative. In Argentina, Brazil, Croatia, Mexico, South Africa and Turkey, the online research approach used results in a high concentration of urban professionals. These are likely to be relatively high earners within their country. For more details, see: The state of the global mobile consumer, Deloitte Touche Tohmatsu Limited, December 2012. See: www.deloitte.com/mobileconsumer207 According to one survey, ten percent of smartphone owners in the UK “cannot afford” to pay for apps. Source: One in 10 Brit smartphone owners ‘can’t afford’ to pay for apps, The Register, 27 November 2012. See: http://www.theregister.co.uk/2012/11/27/app_payment/208 For detail on how e-commerce varied between different mobile OSs. See: IBM 2012 Holiday Benchmark Reports, 2012: http://www-01.ibm.com/software/ marketing-solutions/benchmark-reports/black-friday-2012.html?cm_mmc=holiday2012-benchmark-reports-_-press-release-_-wire-_-text-link209 According to one UK study conducted by Mintel called Smartphone Purchasing Habits published in November 2012, about 30 percent of smartphone owners are unlikely to ever purchase through their smartphones.210 Source: Free Wi-Fi for Facebook users?, Indian Express, 5 November 2012. See: http://www.indianexpress.com/news/free-wifi-for-facebook-users-/1027045211 There is also mobile advertising generated by text messages, which can be received on standard feature phones, smartphones and tablet computers with cellular mobile connections. Revenues from text message based advertising are modest, at about six percent of the $9 billion mobile industry total in 2013. The total revenues for mobile advertising in 2013 are Deloitte Touche Tohmatsu Limited estimates based on existing knowledge, conversations with industry players and published industry estimates and forecasts including: Mobile Ad Spending To Hit $6.4 Billion Globally In 2012, Business Insider, 1 August 2012. See: http://www.businessinsider.com/mobile-ad-spending-to-hit-64-billion-globally-in-2012-2012-8#ixzz2Gkk9pOEg212a The revenue split by device category is a Deloitte Touche Tohmatsu Limited estimate based on existing knowledge, conversations with industry players and published industry estimates and forecasts including: These Graphs Show How Tablet Ad Spending Will Crush Smartphones Over The Next Four Years, Business Insider, 8 November 2012: http://www.businessinsider.com/idc-predicts-tablet-vs-smartphone-ad-spend-2012-11212b The revenue per device is a Deloitte Touche Tohmatsu Limited estimate and had been calculated by dividing the total revenues for the two categories to the installed base of smartphones and tablets.213 The share of in-app ads as a proportion of the total varies by geography. In North America, 62.6 percent of mobile ad requests are in-app, and 37.4 percent are mobile web. In France, Germany, Italy, Spain and the UK, 62 percent of mobile ad requests are in-app and 38 percent are from the mobile web. In other words, very close percentages in those markets. Globally the distribution is more even – 48.1 percent of ads were in-app versus 51.9 percent on the mobile web. Source: State Of Mobile Ads: Rich Media Rules, Mobile Web Still In Play & Even RIM Makes A Showing, TechCrunch, 1 October 2012, See: http://techcrunch. com/2012/10/01/state-of-mobile-ads-rich-media-rules-mobile-web-still-in-play-even-rim-makes-a-showing/214 Smartphone and tablet mobile advertising includes revenues from messaging (as a form of advertising).215 The volume for the installed base of tablets and smartphones are Deloitte Touche Tohmatsu Limited estimates based on existing knowledge, conversations with industry players and published industry estimates and forecasts including: WHY TABLETS WILL BECOME OUR PRIMARY COMPUTING DEVICE, Forrester, Frank Gillett’s Blog, 23 April 2013. See: http://blogs.forrester.com/frank_gillett/12-04-23-why_tablets_will_become_our_primary_computing_device216 The total revenues for mobile advertising in 2014 and the split by device category are Deloitte Touche Tohmatsu Limited estimates based on existing knowledge, conversations with industry players and published industry estimates and forecast including: Mobile Ad Spending To Hit $6.4 Billion Globally In 2012, Business Insider, 1 August 2012: http://www.businessinsider.com/mobile-ad-spending-to-hit-64-billion-globally-in-2012-2012-8#ixzz2Gkk9pOEg; These Graphs Show How Tablet Ad Spending Will Crush Smartphones Over The Next Four Years, Business Insider, 8 November 2012: http://www.businessinsider.com/idc- predicts-tablet-vs-smartphone-ad-spend-2012-11217 Source: The State of Mobile Advertising, Q2 2012, Opera Software, June 2012. See: http://www.opera.com/sma/2012/q2/218 Data is from Jumptap. Source: Jumptap: In Mobile, Size May Not Matter, 6 May 2012. See: http://www.jumptap.com/home-page-news/jumptap-in-mobile- size-may-not-matter/; Tablet CPMs are higher than that of mobile because of the “larger screen size, more limited reach and high demand”. Source: Tablet Ads Deliver Results, but Barriers Remain, eMarketer, 18 October 2012. See: http://www.emarketer.com/(S(u0eug255jbekjv55chixzqfb))/Article.aspx?R=1009423 219 Source: The State of Mobile Advertising, Q2 2012, Opera Software, June 2012. See: http://www.opera.com/sma/2012/q2/; M&C Saatchi commented in October 2012 that premium smartphone ad rates had risen 20 percent in the last year. Source: Tipping Point For The Touchscreen: Tablet Ad Spend Will Outweigh Smartphone Spend This Holiday Season, Says M&C Saatchi, TechCrunch, 19 October 2012. See: http://techcrunch.com/2012/10/19/tipping-point-for-the- touchscreen-tablet-ad-spend-will-outweigh-smartphone-spend-this-holiday-season-says-mc-saatchi/60

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220 M&C Saatchi, the agency which published the findings, also noted that 90 percent of its clients were planning to grow tablet spend by 25 percent “in the coming months”. Source: Tipping Point For The Touchscreen: Tablet Ad Spend Will Outweigh Smartphone Spend This Holiday Season, Says M&C Saatchi, TechCrunch, 19 October 2012. See: http://techcrunch.com/2012/10/19/tipping-point-for-the-touchscreen-tablet-ad-spend-will-outweigh-smartphone-spend-this- holiday-season-says-mc-saatchi/221 This is from about $50 at the low-end to premium devices costing around $800 for both tablets and smartphones.222 One analysis of mobile advertising effectiveness, performed on a base of six million clicks, concluded that about 22 percent of clicks were accidental. Source: Study: 40% of mobile clicks are accidental or fraudulent, Trademob, September 2012. See: http://www.trademob.com/wp-content/uploads/2012/09/Trademob_ Whitepaper_Click-Fraud.pdf223 Deloitte Touche Tohmatsu Limited estimates that about 80 percent of tablet owners also have a smartphone. The estimates are based on a 15-country survey of mobile phone users around the world. For more details, see: The state of the global mobile consumer, Deloitte Touche Tohmatsu Limited, December 2012. See: www.deloitte.com/mobileconsumer224 The volume for the installed base of tablets and penetration are Deloitte Touche Tohmatsu Limited estimates based on existing knowledge, conversations with industry players and published industry estimates and forecasts including: WHY TABLETS WILL BECOME OUR PRIMARY COMPUTING DEVICE, Forrester, Frank Gillett’s Blog, 23 April 2013. See: http://blogs.forrester.com/frank_gillett/12-04-23-why_tablets_will_become_our_primary_computing_device; Global tablet penetration rate from 2010 to 2014, Statista: http://www.statista.com/statistics/219909/global-tablet-penetration-forecast/225 For more information on variations in ad impressions by operating system. Source: State Of Mobile Ads: Rich Media Rules, Mobile Web Still In Play & Even RIM Makes A Showing, TechCrunch, 1 October 2012. See: http://techcrunch.com/2012/10/01/state-of-mobile-ads-rich-media-rules-mobile-web-still-in-play-even-rim- makes-a-showing/226 Source: In-Game Advertising Still Not Drawing Ad Budgets, ClickZ, 29 November 2012. See: http://www.clickz.com/clickz/news/2228249/ingame-advertising- still-not-drawing-ad-budgets227 According to one study of US brands, customer satisfaction is generally higher with PC sites. Source: Satisfaction Lower With Mobile Than PC Websites, May Impact Brand Perception, Marketing Land, 12 January 2012. See: http://marketingland.com/satisfaction-lower-with-mobile-than-pc-websites-may-impact- brand-perception-3275 228 Source: If Content Is King, Multiscreen Is The Queen, Says New Google Study, TechCrunch, 29 August 2012. See: http://techcrunch.com/2012/08/29/if-content- is-king-multiscreen-is-the-queen-says-new-google-study/229 According to one study, based on six million clicks, about 18 percent were considered fraudulent. Source: Study: 40% of mobile clicks are accidental or fraudulent, Trademob, September 2012. See: http://www.trademob.com/wp-content/uploads/2012/09/Trademob_Whitepaper_Click-Fraud.pdf230 Source: As many as 77% are now going online solely via their mobile phone, The Wall, 18 September 2012. See: http://wallblog.co.uk/2012/09/18/as-many-as- 77-are-now-going-online-solely-via-their-mobile-phone/231 Source: Smart phone malware: The six worst offenders, NBCNews, 2011. See: http://www.nbcnews.com/technology/technolog/smart-phone-malware-six-worst- offenders-125248 232 Source: Mobile data could spell end to “all you can eat”, ZDNet, 14 February 2012. See: http://www.zdnet.com/mobile-data-boom-could-spell-end-to-all-you- can-eat-3040095041/233 For examples of bill shock: Source: Boy of 12 who ran up £1,700 phone bill in a month chatting to girlfriend on his father’s mobile, Daily Mail, 17 June 2012. See: http://www.dailymail.co.uk/news/article-2160819/Boy-12-ran-1-700-phone-month-chatting-girlfriend-fathers-mobile.html; Mobile phones: how a child’s £12 plan gave his father a £188 bill, Guardian, 19 November 2011. See: http://www.guardian.co.uk/money/2011/nov/19/mobile-phone-child-plan234 The exact size of files will also be dependent on the type of data compression technology used.235 By end 2013 there might be seven billion mobile subscribers worldwide. The installed base of smartphones is expected to reach 1.9 billion by year-end. For more information, see 2013 Prediction: Smartphones ship a billion but usage becomes simpler.236 The Deloitte Global Mobile Consumer Survey is a 15-country survey of mobile phone users around the world. All research has been undertaken via online research. Fieldwork took place between May to June 2012. In Belgium, Canada, Finland, France, Germany, Japan, the UK and the United States are nationally representative. In Argentina, Brazil, Croatia, Mexico, South Africa and Turkey, the online research approach used results in a high concentration of urban professionals. These are likely to be relatively high earners within their country. For more details, see: The state of the global mobile consumer, Deloitte Touche Tohmatsu Limited, December 2012. See: www.deloitte.com/mobileconsumer237 The Deloitte Global Mobile Consumer Survey is a 15-country survey of mobile phone users around the world. For more details, see: The state of the global mobile consumer, Deloitte Touche Tohmatsu Limited, December 2012. See: www.deloitte.com/mobileconsumer238 The Deloitte Global Mobile Consumer Survey is a 15-country survey of mobile phone users around the world. All research has been undertaken via online research. Fieldwork took place between May to June 2012. In Belgium, Canada, Finland, France, Germany, Japan, the UK and the United States are nationally representative. In Argentina, Brazil, Croatia, Mexico, South Africa and Turkey, the online research approach used results in a high concentration of urban professionals. These are likely to be relatively high earners within their country. For more details, see: The state of the global mobile consumer, Deloitte Touche Tohmatsu Limited, December 2012. See: www.deloitte.com/mobileconsumer239 The Deloitte Global Mobile Consumer Survey is a 15-country survey of mobile phone users around the world. For more details, see: The state of the global mobile consumer, Deloitte Touche Tohmatsu Limited, December 2012. See: www.deloitte.com/mobileconsumer240 This question around preferred services was not asked in the United States survey. For more details, see: The state of the global mobile consumer, Deloitte Touche Tohmatsu Limited, December 2012. See: www.deloitte.com/mobileconsumer241 Reliance in India offers unlimited WhatsApp and Facebook for Rs 16 ($0.30) per month. Source: Reliance to offer unlimited WhatsApp, Facebook for Rs 16 per month, Firstpost, 16 October 2012. See: http://www.firstpost.com/tech/reliance-to-offer-unlimited-whatsapp-facebook-access-for-rs-16-per-month-491380.html ; Etisalat Nigeria offers unlimited access on Facebook with some bundles Source: Etisalat Offers Unlimited Access On Facebook With New Bundles, Mobile World, 11 June 2012. See: http://www.mobileworldmag.com/etisalat-provides-unlimited-access-on-facebook-with-new-bundles.html242 3 in Hong Kong offers unlimited access to WhatsApp for about $1 per month or just over $6 per month when roaming. Source: WhatsApp and 3 HK tie the knot, The Standard, 13 September 2012. See: http://www.thestandard.com.hk/news_detail.asp?pp_cat=21&art_id=126418&sid=37629339&con_type=1&d_ str=20120913 Technology, Media & Telecommunications Predictions 2013 61

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243 Source: Telkomsel partners with Skype to bring a new communications experience in Indonesia, Skype, 26 October 2011. See: http://about.skype.com/ press/2011/10/telekomsel_partners_with_skype.html244 The service may also launch in Indonesia and the Philippines in Q1 2013. Source: Deezer launches in Thailand, Singapore and Malaysia, Music Week, 15 August 2012. See: http://www.musicweek.com/news/read/deezer-launches-in-thailand-singapore-and-malaysia/051384 245 Source: Spotify makes German push with Deutsche Telekom partnership, Strategy Digital Media, 30 August 2012. See: http://www.strategyeyedigitalmedia. com/article/2012/08/30/spotify_makes_german_push_with_deutsche_telekom_partnership/246 The prices include VAT. Source: Toda la TV en tu móvil, Vodafone, December 2012. See: http://www.vodafone.es/apps-y-descargas/es/tv/toda-la-tv-en-tu-movil/; Source: Toda la TV en tu móvil, Vodafone, December 2012: http://www.vodafone.gr/portal/client/cms/viewCmsPage.action?pageId=10858&request_locale=en247 For example, as of December 2012, Movistar Spain was offering usage of Joyn, a messaging application for free. Usage of the service was not deducted from data customers’ plans; those that did not have a data plan could still use the service. Source: Movistar, December 2012. See: http://www.movistar.es/ particulares/movil/servicios/ficha/joyn248 Source: Google launches free internet access for developing countries, Engage Web, 13 November 2012. See: http://www.engageweb.co.uk/google-launches- free-internet-access-for-developing-countries-6212.html249 Moore’s Law is an observation made by Gordon Moore, a cofounder of Intel, in 1965 that the number of transistors which can fit in a given area doubles every two years. A transistor is a semiconductor device which acts as a sort of remote control valve, or switch, for electricity. The challenge over the years has been making smaller transistors. This is an engineering problem which requires a series of surmountable challenges in a number of fields. It is not a physical limitation. Once those problems have been solved the cost to manufacture a square centimeter of smaller transistors is roughly the same as the cost to manufacture a square centimeter of larger transistors. So, unique in the semiconductor industry, you get more and better transistors for the same amount of money. That in a nutshell, is Moore’s Law.250 Amazon’s Kindle 3G services include bundled connectivity charges. Domestic and roaming cellular charges are included in the price of the device and the service. For more information: Source: Kindle Keyboard 3G, Amazon, 2012. See: http://www.amazon.co.uk/Kindle-Wireless-Reader-3G-Wifi-Graphite/dp/ B002LVUWFE/ref=sr_1_6?s=digital-text&ie=UTF8&qid=1354449955&sr=1-6#kindle-features-wireless251 Source: Google, O-Zone tie up to offer free Wi-Fi access, Business Standard, 11 January 2012. See: http://business-standard.com/india/news/google-o-zone- tieto-offer-free-wi-fi-access/461448/252 Source: Airwave overload? Addressing Spectrum Strategy Issues That Jeopardize U.S. Mobile Broadband Leadership, Deloitte Development LLC, September 2012. See: www.deloitte.com/us/spectrum253 Source: Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2011–2016, Cisco, 14 February, 2012. See: http://www.cisco.com/en/US/ solutions/collateral/ns341/ns525/ns537/ns705/ns827/white_paper_c11-520862.pdf254 Source: 4G LTE-Advanced Technology Overview, Agilent Technologies. See: http://www.home.agilent.com/agilent/editorial.jspx?cc=IN&lc=eng&ckey=1905163& id=1905163 255 Source: Wi-Fi CERTIFIED Passpoint, Wi-Fi Alliance. See: http://www.wi-fi.org/discover-and-learn/wi-fi-certified-passpoint%E2%84%A2256 Source: Next Generation Hotspot (NGH) Program, Wireless Broadband Alliance. See: http://www.wballiance.com/wba-initiatives/next-generation-hotspot/257 Source: Major Telcos to Trial Next Generation Hotspots Using First Commercially Ready Equipment, 26 June, 2012. Wireless Broadband Alliance. See: http:// www.wballiance.com/2012/06/26/major-telcos-to-trial-next-generation-hotspots-using-first-commercially-ready-equipment/258 Source: Cognitive Radio, Wikipedia. See: http://en.wikipedia.org/wiki/Cognitive_radio259 Source: Airwave overload? Addressing Spectrum Strategy Issues That Jeopardize U.S. Mobile Broadband Leadership, Page 32, Deloitte Development LLC, September 2012. See: http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/TMT_us_tmt/us_tmt_Spectrum_Thought_Leadership_ September_092512.pdf260 Source: Airwave overload? Addressing Spectrum Strategy Issues That Jeopardize U.S. Mobile Broadband Leadership, Page 23, Deloitte Development LLC, September 2012. See: http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/TMT_us_tmt/us_tmt_Spectrum_Thought_Leadership_ September_092512.pdf62